Country Risk, Corporate Strategy, Bank Competition and Performance of Multinational Banks in Sub-Saharan Africa
$ 49.5
Description
Basing on ontology of multinational enterprises; informed by strategic management’s co-alignment theory, this study investigates the effect of country risk, corporate strategy, and competition on profitability of multinational banks. The epistemological study questions are addressed using panel data (2007-2017) and Systems Generalized Moments Methods estimation technique. Results indicate: first, country risk negatively affects multinational banks’ long run profitability. Second, corporate strategy's constructs: geographic diversification and equity financing positively affect profitability while debt financing posits a negative effect. Third, geographic diversification strategy helps to reduce the negative effect of country risk on profitability. Fourth, there is notable positive bi-directional causality between bank competition and profitability. Fifth, there is no observed significant difference in performance between the pan-African and overseas multinational banks. Finally, for control variables, there is noticeable elastic response of bank profits to bank size, but inelastic response of profits to country size. Importance to investors and management is need to not fear competition, but to align country risk with key corporate strategies regarding where to go, and source of finance for the strategy taken.