Corporate Governance, Regulations and Banking Stability in Africa

This study examines how country-level corporate governance structures (CLCGS) affect the nexus between financial sector transparency regulations (FSTR) (led by the private and public sectors) and banking stability in Africa. Employing a Prais-Winsten panel data of about 77 banks across 30 African economies between 2006 and 2015, the results show that CLCGSs are crucial in shaping how FSTR led by the private and public sector affect banking stability in Africa. Specifically, we find positive and negative synergies between FSTR (led by the public and private sectors) and CLCGSs on banking stability, respectively. Additionally, the net effect results show that the negative effects of public and private sector-led FSTR on banking stability are suppressed when interacted with CLCGSs. Splitting our sample into economies with strong and weak CLCGSs, we report that FSTR led by the public sector fosters banking stability in economies with strong CLCGSs, while FSTR led by the private sector fosters banking stability in economies with weak CLCGSs in Africa. These findings provide clear indications that building and enhancing CLCGSs can help restrict the reduction effect of private and public sector-led FSTRs on banking stability in Africa.