Browsing by Author "Sarpong-Kumankoma, E."
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Item Bank mergers and acquisitions and the post-merger and acquisition performance of combined banks: evidence from Sub-Saharan Africa(Cogent Economics & Finance, 2024) Ayagre, P.; Aboagye, A.Q.Q.; Sarpong-Kumankoma, E.; Asuming, P.O.This study sought to ascertain the effects of bank mergers and acquisitions on the performance of merged banks in Sub-Saharan African (SSA) countries between 2003 and 2019. Specifically, the study aimed to investigate the impact of regulation-induced bank mergers and acquisitions (M&A’s) on the post-merger profitability of merged banks in SSA. The motivation for the study is to provide evidence for or against the regulator’s claims that regulation-induced bank M&As will improve the performance of merged banks in SSA. The article presents the results of the total sample of all mergers and acquisitions examined in the study and two sub-samples: the regulation-induced M&A sub-sample and the voluntary M&A sub-sample. We measure profitability by return on assets, return on equity, and net interest margin. The paper employed a dynamic panel Generalized Methods of Moments approach to analyse the relationship between bank M&As and profitability. The study found no profitability improvement after M&A across all profitability measures for the total sample and the two sub-samples. Instead, the empirical results reveal that bank profitability suffers after mergers and acquisitions across all profitability measures. The results show that, for regulation-induced mergers and acquisitions, a merged bank’s profitability is adversely affected from the beginning of the merger or acquisition to the sixth year of mergers and acquisitions. The findings also reveal that bank risk negatively affect profitability, while liquidity positively affect profitability, except returns on equity. Bank costs-to-income ratios as expected to show negative relationship with profitability. All macroeconomic variables show the expected relationship, positive for GDP growth and negative for inflationItem Bank productivity in Africa(International Journal of Productivity and Performance Management, 2019-06) Nartey, S.B.; Osei, K.A.; Sarpong-Kumankoma, E.Purpose – The purpose of this paper is to provide a total factor productivity index for the African banking industry. It also investigates the impact of some internal and external determinants affecting bank productivity. Design/methodology/approach – The biennial Malmquist productivity index and various regression models (ordinary least squares, Tobit and truncated bootstrapped regression) are employed in analyzing data from 120 banks in 24 African countries from 2007 to 2012. Findings – The results indicate a general decline in productivity of banks in Africa, largely due to inadequate technological progress. State banks are found to be more productive than foreign and private banks. The regression analyses showed that non-executive directors, leverage, management quality, credit risk, competition and exchange rate have significant impact on bank productivity, but ownership and CEOduality do not. Practical implications – The results have implications for management of banks, governments and regulators. It shows the need for policy and investments that improve state-of-the art technology. The findings also seem to suggest poor management practices in input usage, especially in operational management, as well as costs emanating from non-interest sources. Bank managers need to address these deficiencies to improve productivity in African banking markets. Originality/value – A major contribution of this paper is the productivity index provided for the African banking industry. This study is also the first to apply the biennial Malmquist to analyze productivity in the African banking industry.Item Central bank coordinated policies and bank market power: an insight from the African context(Cogent Economics & Finance, 2023) Ofori-Sasu, D.; Agbloyor, E.K.; Sarpong-Kumankoma, E.; Abor, J.Y.The paper examines the impact of central bank regulatory policies on market power in Africa. The study presents a representative sample of 52 African economies over the period 2006–2020. The study shows that the individual regulatory policies of the central bank (i.e. monetary and macro-prudential policies) enhance banks’ market power. Also, it reveals that central bank's regulatory policies are better coordinated, as complements, in achieving greater market power. banks in countries with strong central bank independence (CBI) framework. However, the coordinated policies are substitutes in determining bank’s market power in countries with weak CBI framework. The policy implication is that the right policy mix of coordinated central bank regulatory policy framework is important in determining an optimal outcome of bank’s market power in both an inclusive central bank (monetary-prudential) policy targeting economies and an independent policy targeting economies.Item Debt Financing, Information Sharing, and Profitability: Evidence from Listed Firms from an Emerging Economy(Journal of African Business, 2023) Osei, J.O.; Sarpong-Kumankoma, E.; Abor, J.Y.This study investigates how credit information sharing conditions debt financing to boost the profitability of 20 listed enterprises on the Ghana Stock Exchange between 2003 and 2013. We employ robust least squares and simultaneous bootstrapping models in a panel setting. Our findings show that the impact of debt financing profitability increases when it is subject to information sharing and takes the shape of short, long, and total debts. In the worst-case situation, contingent debt financing reduces the negative impact of debt financing on profitability. Therefore, authorities must adopt laws and legislation that deepen, widen, and strengthen credit information sharing to offset the negative impact of information asymmetry on loan financing and business profitability.Item Differences in bank profit persistence in Sub-Saharan Africa(African Journal of Economic and Management Studies, 2018-11) Sarpong-Kumankoma, E.; Abor, J.; Aboagye, A.Q.Q.; Amidu, M.Purpose The purpose of this paper is to examine differences in determinants of bank profit persistence among Sub-Saharan African (SSA) countries. Design/methodology/approach Using system generalized method of moments and data from four SSA countries during the period 2006–2012, this study considers differences in determinants of bank profit persistence across countries. Findings Efficiency in cost management is a major determinant of profit persistence in all the countries. However, concentration is found to be insignificant in all the estimations, suggesting that efficiency may be a more important determinant of profit persistence than concentration. Economic freedom associates negatively with profit persistence in Ghana, but its effect is insignificant in Tanzania, Kenya and South Africa. Lending specialization translates into less profit persistence in South Africa, but greater persistence in Tanzania. Higher levels of financial development result in lower profit persistence in Kenya and Ghana, but does not matter in Tanzania and South Africa. Practical implications The level of profit persistence gives an indication of the effectiveness of competition policies, and the differences observed in their determinants in this study suggest the need for tailor-made policy responses in the different countries. Originality/value This study improves the understanding of why some banking market competition policies have not achieved the desired outcomes in some countries. It is evident that blanket rules or wholesale importation of policies from other countries may not work in different contexts.Item Does corporate governance explain the quality of bank loan portfolios? Evidence from an emerging economy(Journal of Financial Economic Policy, 2020-04-17) Fiador, V.; Sarpong-Kumankoma, E.Purpose – The purpose of this study is to assess the impact of corporate governance variables on the quality of bank loan portfolios. Design/methodology/approach – The study used a panel-corrected standard errors estimation model with the most recent 11-year data from2006 to 2016 on selected Ghanaian banks. Findings – The findings indicate that corporate governance is relevant within the banking sector and plays a key role in improving loan quality. Having a large board with the attendant pool of expertize, boards with mostly non-executive members and duality of the CEO-board chair can be harnessed to improve bank loan quality. Female participation on boards seems to detract from good performance, creating the impression of tokenism in the Ghanaian banking sector. Originality/value – The study has important implications for board construction within the banking sector and the discourse on bank asset quality. Keywords Corporate governance, Asset quality, Bank loan quality, Banking sector, Gender diversity, Non-performing loans, NPLs, Banks, Financial institutions and services, Corporate finance and governanceItem Financial freedom, market power and bank margins in sub-Saharan Africa(Journal of Financial Regulation and Compliance, 2019-10-31) Sarpong-Kumankoma, E.; Abor, J.; Aboagye, A.Q.Q.; Amidu, M.Purpose – This paper examines the effect of financial (banking) freedom and market power on bank net interest margins (NIM). Design/methodology/approach – The study uses data from 11 sub-Saharan African countries over the period, 2006-2012, and the system generalized method of moments to assess how financial freedom affects the relationship betweenmarket power and bank NIM. Findings – The authors find that both financial freedom and market power have positive relationships with bank NIM. However, there is some indication that the impact of market power on bank margins is sensitive to the level of financial freedom prevailing in an economy. It appears that as competition intensifies, margins of banks in freer countries are likely to reduce faster than those in areas with more restrictions. Practical implications – Competition policies could be guided by the insight on how financial freedom moderates the effect of market power on bank margins. Originality/value – This study provides new empirical evidence on how the level of financial freedom affects bankmargins and the market power-bank margins relationship.Item Financial inclusion: a catalyst for financial system development in emerging and frontier markets(Journal of Financial Economic, 2023) Ofosu-Mensah, J.A.; Yiadom, E.B.; Sarpong-Kumankoma, E.; Boadi, I.Purpose – This study aims to examine the relationship between financial inclusion and financial system development in emerging and frontier markets. Design/methodology/approach – Using data across 35 countries over 19 years (2004–2022), the improved GMM estimation technique reveals that financial inclusion significantly contributes to the development of financial systems. Findings – The study uses a segmented approach, dividing financial development indices into subindices: financial depth, financial access and financial efficiency. Indicators of bank financial inclusion show a positive and highly significant relationship with bank depth and access but a negative relationship with bank efficiency. Similarly, indicators of the debt market and stock market financial inclusion demonstrate positive relationships with market depth and access but negative relationships with debt and stock market efficiency. The study further examines composite indexes of financial inclusion for bank, debt and stock market segments, finding strong and highly significant relationships with market development. These results underscore the importance of promoting financial inclusion across all segments of the financial sector to achieve an inclusive financial system. Practical implications – The implications of this research highlight the need for policymakers and practitioners to implement policies and regulations that enhance financial inclusion and foster the development of robust financial systems. By extending access to mainstream financial instruments and services, financial institutions can stimulate financial intermediation and support, thereby accelerating the development of the banking, debt and stock markets. Originality/value – The study is robust to the use of several indicators of financial inclusion and financial development, and it forms part of the early studies that examine the close relationship between the two variables.Item Financial Market Development and Capital Structure of Listed Firms – Empirical Evidence from Ghana(2011) Doku, J. N.,; Adjasi, C. K. D.,; Sarpong-Kumankoma, E.This study explores the relationship between financial market development and choice of finance (debt-equity) of listed firms in Ghana in a panel data framework.The core concern of this study is to test whether debt and equity finance are complements or substitutes. The study used panel data which involves pooling of twenty-one listed firms on the Ghana Stock Exchange (GSE) over the period 1995-2005. The study finds evidence of complementarity between banking and stock market developments in financing decisions of listed firms in Ghana. The stock market development is indicated to have a positive effect on the capital structure decisions of listed firms. However, substitution effect between debt and equity mainly in favour of equity financing sets in as the financial landscape develops further. This finding emphasises the important role equity markets in developing countries play in capital structure of listed firms.Item Freedom, competition and bank profitability in Sub-Saharan Africa(Journal of Financial Regulation and Compliance, 2018-11) Sarpong-Kumankoma, E.; Abor, J.; Aboagye, A.Q.Q.; Amidu, M.Purpose This paper aims to examine the effects of financial freedom and competition on bank profitability. Design/methodology/approach The study uses system generalized method of moments and data from 139 banks across 11 Sub-Saharan African countries during the period 2006-2012. Findings The results of the study show that higher market power (less competition) is positively related to bank profitability, but operating efficiency is a more important determinant of profitability than market power. Also, both financial freedom and economic freedom show a positive impact on bank profits. The authors find evidence that banks with higher market power operating in countries with higher freedom for banking activities are more profitable than their counterparts in countries with greater restrictions on banking activities. Practical implications The results have shown that allowing banks greater freedom to operate would enhance their performance, without necessarily damaging the economy, as operating efficiency appears to be a more important reason for the observed profitability than market power. Originality/value This study provides insight on the ambiguous relationship between competition and bank profitability by considering the moderating effect of financial freedom which has not been taken into account in previous studies.Item Housing and construction finance, deposit mobilisation and bank performance in ghana.(2011) Ametefe, F.; Aboagye, A.Q.Q.; Sarpong-Kumankoma, E.We analyse bank performance in Ghana over the period 2001–2007. We posit a two‐equation simultaneous system for return on assets and volatility of earnings. In addition to other explanatory variables, this study is interested in the impact of deposits as a proportion of total assets and the proportion of housing and construction loans that banks extend. The triangular system is estimated by the least squares dummy variable approach. We find that the coefficients of the deposit ratio are very small in both equations and not at all significant. At the 10% significance level, the ratio of total loans to assets is positive and significant in both equations. Housing and construction loans tend to increase return on equity and decrease volatility. Increases in equity to assets ratio increase return on assets and decrease volatility of earnings significantly. The impact of non‐interest income is small and tends to increase return on assets and decrease volatility. Non‐performing loan ratio has the expected sign and is significant in the return on assets equation. Increases in inflation decrease profitability and increase volatility. We recommend that banks raise longer‐term financing on the capital market to undertake longer‐term profitable projects such as housing finance.Item Housing and Construction Finance, Deposit Mobilization and Bank Performance In Ghana(2011) Ametefe, F.; Aboagye, A.Q.Q.; Sarpong-Kumankoma, E.We analyse bank performance in Ghana over the period 2001–2007. We posit a two‐equation simultaneous system for return on assets and volatility of earnings. In addition to other explanatory variables, this study is interested in the impact of deposits as a proportion of total assets and the proportion of housing and construction loans that banks extend. The triangular system is estimated by the least squares dummy variable approach. We find that the coefficients of the deposit ratio are very small in both equations and not at all significant. At the 10% significance level, the ratio of total loans to assets is positive and significant in both equations. Housing and construction loans tend to increase return on equity and decrease volatility. Increases in equity to assets ratio increase return on assets and decrease volatility of earnings significantly. The impact of non‐interest income is small and tends to increase return on assets and decrease volatility. Non‐performing loan ratio has the expected sign and is significant in the return on assets equation. Increases in inflation decrease profitability and increase volatility. We recommend that banks raise longer‐term financing on the capital market to undertake longer‐term profitable projects such as housing finance.Item Monetary policy effectiveness in Africa: the role of financial development and institutional quality(Journal of Financial Regulation and Compliance, 2021) Fiador, V.; Sarpong-Kumankoma, E.; Karikari, N.K.Purpose: This study aims to provide empirical evidence of the pass-through effect of monetary policy on bank lending rates vis-à-vis the potential moderating effects of financial sector development and institutional quality in Africa. Design, methodology, and approach: The study uses robust fixed effects panel data estimation techniques and data from 1990 to 2017 across 37 countries in Africa. Findings: The results show that financial development aids in the effectiveness of monetary policy transmission. A decomposition of financial development into financial institution development and financial market development shows that financial institutional development is more influential with regard to effectiveness of the interest rate pass-through compared to financial market development. This study again shows that improvements in the quality of institutions reduced lending rates in African economies. Practical implications: The findings present relevant policy implications regarding effective transmission of monetary policy by linking the pursuit of institutional quality, characterized by the control of corruption, political stability, regulatory quality, rule of law and the voice of accountability and development of financial institutions with lending rates and ultimately the demand for growth capital. Originality/value: This study contributes to the literature on the factors influencing the effectiveness of monetary policy. This study considers financial sector development and institutional quality as conduits to monetary policy effectiveness in developing African countries.Item Oil Price Volatility And US Dollar Exchange Rate Volatility Of Some Oil-Dependent Economies(The Journal of International Trade & Economic Development, 2021) Donkor, R.A.; Mensah, L.; Sarpong-Kumankoma, E.This paper examines the relationship and related causality patterns of oil price volatility and exchange rate volatility of a group of oil-dependent economies before and after the 2008–2009 global financial crisis. We employed weekly time-series data of oil price and exchange rates for 2000–2007 (pre-crisis) and 2010–2016 (post-crisis). United States dollar exchange rates are for Ghanaian cedi, Nigerian naira, Russian ruble, Indian rupee, South African rand, and the Euro. To investigate the volatility impacts that exist between oil price and exchange rates during both sub-sample periods, we merged Vector Autoregressive (VAR) with GARCH and EGARCH models in the form of bivariate VAR-GARCH and VAR-EGARCH. We further adopted the Toda-Yamamoto causality test to investigate related causality patterns. Empirical findings revealed both a bilateral and unidirectional relationship between oil price volatility and exchange rates volatility of four out of the six oil-dependent economies considered for the study. These findings were more prevalent in the post-crisis period than the pre-crisis period. We also confirmed both bidirectional and unidirectional causality pattern between oil price volatility and exchange rate volatility of the same four currencies as observed with the VAR results in both sub-sample periodsItem Risk Exposure and Financial Policy: An Empirical Analysis of Emerging Markets(2009) Abor, J.; Sarpong-Kumankoma, E.; Fiawoyife, E.; Osei, K.A.Purpose – This paper aims to evaluate the effect of risk on the financial policy of emerging market firms. Design/methodology/approach – Using data from 34 emerging markets during a 17‐year period, 1990‐2006, a panel data model is employed for the analysis. Findings – The results of this study indicate that firms with high probability of survival are likely to employ more debt. The level of risk exposure, particularly business risk is important in influencing the financial decisions of firms in emerging market economies. It is argued that since the use of debt increases firms' exposure to financial risk, firms with high business risk would shy away from using more debt. Also, finance providers in the financial market may not be interested in lending to firms with high business risk. This study also identified profitability, dividend, asset tangibility, growth opportunities, and GDP per capita as important determinants of the financial policy of emerging market firms. Originality/value – This study contributes to the extant literature by providing empirical evidence regarding the effect of risk on the financial policy of emerging market firms.Item Risk exposure and financial policy: an empirical analysis of emerging markets(Journal of Economics Studies, 2009) Abor, J.; Sarpong-Kumankoma, E.; Fiawoyife, E.; Osei, K.A.Item The role of non-executive directors in the Ghanaian SME sector(Corporate Board: Role, Duties and Composition, 2006-01) Sarpong-Kumankoma, E.; Amidu, M.; Abor, J.This paper reports on the role of NEDs among Ghanaian SMEs. The results of this study revealed that less than half of the SMEs sampled engage the services of NED. The study also revealed that relatively larger SMEs are more likely to employ the services of NEDs. We also found that over 80% of the SMEs with NEDs were either growing or growing rapidly. NEDs' contributions were also found to be multi-various and cut across the range of SME board functions. The study showed that most SMEs acquire NEDs mainly through informal personal contacts such as family, friends of a director, business friends rather than through formal arrangements.