Capital, risk and profitability of WAEMU banks: Does bank ownership matter?

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Main author: Kanga, Désiré
Other authors: Murinde, Victor
Soumaré, Issouf
Format: Journal Article           
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id eprints-34908
recordtype eprints
institution SOAS, University of London
collection SOAS Research Online
language English
language_search English
description We investigate the simultaneous relationship among bank capital, risk and profitability, but also considering bank ownership and the emergence of Pan-African cross-border banks. We specify a simultaneous equation model and estimate it using hand-collected bank level data from all West African Economic and Monetary Union (WAEMU) countries for 2000–2014. We split the countries into lower middle-income (LMICs) and low-income (LICs) according to the World Bank classification. We uncover evidence that the sensitivity of bank profitability to an increase in capital ratio seems to be somewhat higher in LMICs (+0.10) than in LICs (+0.05). Moreover, we find that bank capital positions tend to comove positively with the business cycle in LICs, mimicking a key postulate of Basel III. After differentiating between cross-border Pan-African banks and foreign banks from outside the continent, we find that the overall effect of bank ownership on risk depends on the origin of banks (French versus Pan-African). These findings are robust to alternative estimation techniques and the use of competing measures of risk and profitability.
format Journal Article
author Kanga, Désiré
author_facet Kanga, Désiré
Murinde, Victor
Soumaré, Issouf
authorStr Kanga, Désiré
author_letter Kanga, Désiré
author2 Murinde, Victor
Soumaré, Issouf
author2Str Murinde, Victor
Soumaré, Issouf
title Capital, risk and profitability of WAEMU banks: Does bank ownership matter?
publisher Elsevier
publishDate 2020
url https://eprints.soas.ac.uk/34908/

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