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Bank Deposit Mobilization, Loan Advancement and Financial Stability: The Role of Bank Branches in an Emerging Market

Bank Deposit Mobilization, Loan Advancement and Financial Stability: The Role of Bank Branches in... This study investigates the relationship between bank branches, financial intermediation, and financial stability in Ghana using 35 banks between 2009 and 2017. Employing a panel two-step dynamic GMM model, a non-linear “inverted U-shaped” relationship is documented between bank branches and financial stability. This implies that initial increases in bank branches promote financial stability but beyond 191 and 173 bank branches, bank branching derails banking stability. The findings further reveal that bank branches enhance the positive effects of deposits on bank stability whilst reducing the negative consequences of bank lending on financial stability. These findings imply that while bank management can rely on bank branches to enhance loans and deposits in promoting banking stability, bank management should also be cautious about the number of bank branches they keep given that beyond a certain threshold it may impede stability. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal Of African Business Taylor & Francis

Bank Deposit Mobilization, Loan Advancement and Financial Stability: The Role of Bank Branches in an Emerging Market

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Bank Deposit Mobilization, Loan Advancement and Financial Stability: The Role of Bank Branches in an Emerging Market

Abstract

This study investigates the relationship between bank branches, financial intermediation, and financial stability in Ghana using 35 banks between 2009 and 2017. Employing a panel two-step dynamic GMM model, a non-linear “inverted U-shaped” relationship is documented between bank branches and financial stability. This implies that initial increases in bank branches promote financial stability but beyond 191 and 173 bank branches, bank branching derails banking stability. The...
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Publisher
Taylor & Francis
Copyright
© 2021 Informa UK Limited, trading as Taylor & Francis Group
ISSN
1522-9076
eISSN
1522-8916
DOI
10.1080/15228916.2021.1962155
Publisher site
See Article on Publisher Site

Abstract

This study investigates the relationship between bank branches, financial intermediation, and financial stability in Ghana using 35 banks between 2009 and 2017. Employing a panel two-step dynamic GMM model, a non-linear “inverted U-shaped” relationship is documented between bank branches and financial stability. This implies that initial increases in bank branches promote financial stability but beyond 191 and 173 bank branches, bank branching derails banking stability. The findings further reveal that bank branches enhance the positive effects of deposits on bank stability whilst reducing the negative consequences of bank lending on financial stability. These findings imply that while bank management can rely on bank branches to enhance loans and deposits in promoting banking stability, bank management should also be cautious about the number of bank branches they keep given that beyond a certain threshold it may impede stability.

Journal

Journal Of African Business – Taylor & Francis

Published: Oct 2, 2022

Keywords: Banks; Deposits; Loans; Stability; Branches

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