The dynamic effect of risk management on financial profitability of banks in Africa: An analytical panel quantile regression method

Abstract The main goal of the study is to investigate the integration of financial indicators (bank credit, capital asset, non‐performing loans, and liquidity) in the banking sector can bring macroeconomic benefits to the economies of Africa. This article highlights the performance of framework employed by Brzoza‐Brzezina and Makarski in a small open economic system with two types of financial frictions. The dataset comprises 13 banks in Africa for the period 2000–2016. We estimated our model by way of the usage of system GMM approach and panel quantile regression technique in which the data was grouped into Northern and Southern Africa. We explore the result of credit apportionment of Banks in the crisis period for African countries. We confirm that both groups of variables have significant influence on credit risk. Although we provide evidence that the marginal effect is stronger for bank credit and non‐performing loans than bank liquidity indicating that in Northern Africa countries financial profitability will increase more as a result of increasing bank credit and non‐performing loans than bank liquidity.