Final DBA Dissertation Defense - Assan Jallow

Final DBA Dissertation Defense - Assan Jallow

Basel III In Africa: Implementation And Performance Effects

ABSTRACT

This dissertation assesses the predictive relationships of Basel III implementation, Tier 1 Capital, Tier 2 Capital, Total Assets, Fixed Assets, Loans, Securities, risk-weighted assets, non-performing assets, provision for loan losses, interest income, interest expense, noninterest income, goodwill, and net income, on the Return on Average Assets and Return on Average Equity of African banks. Financial data from 46 African countries, consisting of 609 banks, were collected over multiple years from 2013 - 2023. Drawing on the trade-off, pecking order, stewardship, and agency cost theories, the study develops a theoretical framework to investigate whether Basel III regulations' implementation and performance effects are associated with banks’ financial performance. A quantitative correlational design was employed, using the Ordinary Least Squares (OLS) multiple regression method through the SPSS software due to the time-dependent nature of the data. The study found the following results. First, implementing Basel III regulations does not significantly influence banks’ profitability. Second, the point biserial correlations show a positive correlation between pre- and post-Basel III implementations for ROAA and ROAE. This finding suggests that ROAA and ROAE responded significantly to both the pre-and post-Basel III implementations. Third, the results of Pearson correlations indicated a statistically significant relationship between Tier 1 capital and ROAA and ROAE. This suggests that as Tier 1 capital increases, ROAA and ROAE substantially increase. Fourth, the results show that the time points were statistically insignificant for both ROAA and ROAE, suggesting that the magnitude and direction of pre-Basel III implementation had a lower mean ROAA and ROAE than post-Basel III implementation. The moderated analyses' results revealed that the interaction terms (CapitalTier1_int, Loans_int, and NetIncome_int) were significant with ROAA and ROAE. This finding suggests that the relations of these three factors influence each other in a meaningful and impactful manner with the criterion variables.

Finally, the findings provide timely empirical and policy implications for industry and practice to regulators, officials, investors, shareholders, stakeholders, policymakers, and researchers by revealing the performance effects of Basel III on African banks.

Keywords: Bank Performance; Basel III regulations; Capital Tier 1; Capital Tier 2; Provision for Loan Losses; Non-Performing Loans; Return on Average Assets; Return on Average Equity.

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