1. Explaining Bank Stability Using Bank Specific Factors in Zimbabwe
- Author:
- Albert Muparuri
- Publication Date:
- 01-2018
- Content Type:
- Journal Article
- Journal:
- The Rest: Journal of Politics and Development
- Institution:
- Centre for Strategic Research and Analysis (CESRAN)
- Abstract:
- This study examined the role played by bank specific factors in explaining bank stability in Zimbabwe. A panel data set was compiled covering 15 CAMEL type ratios from all 26 banking institutions which were operational in Zimbabwe between 2009 and 2014. The Principal Component Analysis (PCA) and Random Effects (RE) model were applied to establish the statistically significant CAMEL type bank distress prognosticators in Zimbabwe. This study revealed that Capital, Asset Quality and Earnings (CAE), are the most statistically significant bank specific factors which influence distress in the Zimbabwean market. On the macroeconomic front, statistical significance was established on the ‘end-period Consumer Price Index (CPI)’ in determining bank stability in Zimbabwe. This implies that a deteriorating asset quality base in a bank with a feeble capital base and weak earnings in a market dogged by inflation instability is a classic precursor to bank distress in Zimbabwe.
- Topic:
- Economics, Banks, Banking, and Economic Stability
- Political Geography:
- Africa and Zimbabwe