The persistence of profits of banks in Africa

Mohammed Amidu, Simon K. Harvey

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)

Abstract

This paper analyses the profit persistence of African banking sector, focusing on the role of the level of competition and banks earnings management. We apply Markov chain to analyse the extent and mobility of profit persistence, dynamic auto regressive model to assess the speed of convergence and the quantile regression technique to examine the determinants of profit persistence of banks in Africa. The results show a high level of profit persistence and relatively low speed of convergence. There is also evidence that regulation and banks earnings management affect both the level and persistence of banks profitability. We also find that competition as well as 2007/2008 financial crisis reduce the level and the speed of profit persistence.

Original languageEnglish
Pages (from-to)83-108
Number of pages26
JournalReview of Quantitative Finance and Accounting
Volume47
Issue number1
DOIs
Publication statusPublished - 1 Jul 2016
Externally publishedYes

Keywords

  • Bank earnings
  • Banks
  • Developing countries
  • Imperfect market
  • Markov chain

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