The regional informational efficiency of African banking sector

What is it about?

The study examines the African banking sector's regional informational efficiency and explores the factors influencing its efficiency in incorporating regional information. The paper adopts variance decomposition and state-space techniques to estimate information diffusion. It relies on data from fifteen (15) African countries from 2002 to 2022. The evidence reveals that the African banking sector securities are generally efficient in impounding regional information. Also, the informational efficiency is time-varying. The findings further suggest that banking sector development, inflation, financial market development, control of corruption, voice and accountability, and integration affect the efficiency in impounding regional information into the African banking sector security prices. Regional factors describe the informational efficiency of the African banking sector, which may have implications for security prices, project cost of capital, and the benefits of diversifying into the African banking sector. It also has implications for cross-border resource allocation and crisis transmission.

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