Bank Profitability Determination in Income Brackets in Africa: A
Shareholder versus Stakeholder Perspective

 

Baah Aye Kusi, Agyapomaa Gyeke-Dako and Elikplimi Komla Agbloyor
University of Ghana Business School

ABSTRACT

This study examines the drivers of shareholder and stakeholder profitability in three income brackets in Africa. Employing bank data covering periods between 2006 and 2013 with 282banks, the two step GMM estimates report that shareholder and stakeholder profitability determinants vary in banks across different income brackets in Africa. The findings suggest that with the exception of banks in lower middle income countries (LMICs), shareholder and stakeholder profitability determination were persistent and responded to past profitability in LICs, UMICs and Africa at large. Again, while credit risk and bank stability persistently impacted stakeholder profitability across all the three income brackets, none of the shareholder profitability determinants were persistent across the three income bracket groupings indicating that shareholder profitability drivers are diverse across banks. From the findings, it is evident that the drivers of bank profitability vary across the three income brackets implying that, policy-makers and bank management must select and implement profitability policies from banks in same income bracket. Further, researchers must recognize and appreciate the contextual differences and adjust for the differences in order to make the implementation of research findings easier and practical.