Governance quality, regional integration and African banking sector stability

What is it about?

The study examines the impact of governance quality and regional integration on the stability of the African banking sector and explores the impact of the interaction between the rule of law and the voice and accountability on this stability. The paper adopts variance decomposition and Kalman smoother techniques to estimate the regional integration of the African banking sector. It relies on the random effects panel regression model in establishing the effects.The study shows that regional integration hurts banking stability, whereas governance quality has a favourable impact. The rule of law drives the impact of voice and accountability on banking stability. There exists a non-linear relationship between governance quality and banking stability. There is a significant difference between the effect of governance quality and integration on the financial stability of low-income and upper-middle-income economies.

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