Competition and commercial banks risk-taking: evidence from Sub-Saharan Africa region. Issue 44 (20th September 2018)

• Record Type: Journal Article
• Authors: Akande, Joseph Olorunfemi; Kwenda, Farai; Ehalaiye, Dimu
• Is Part Of: Applied economics. Volume 50:Issue 44(2018)
• Page Start: 4774
• Page End: 4787
• Publication Date: 2018-09-20
• Subjects: Competition -- risk-taking behaviour -- Lerner index -- generalized method of moments -- commercial banks; G21 -- G29 -- L10; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2018.1466995
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: This study investigates the relationship between competition and the risk-taking attitude of banks. We test how this relationship manifests in the Sub-Saharan African(SSA) region's commercial banks in light of the competition-fragility view, using the generalized methods of moments. We studied 440 commercial banks in 37 SSA countries over the period 2006–2015. The results provide evidence that supports a positive relationship between competition and banks' overall risk as well as their credit risk but suggests that off-balance sheet risk reduces with competition. We, therefore, conclude that the propensity to undertake higher risk in a competitive banking environment largely accounts for fragility as argued in the competition-fragility view.