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Corruption, Credit Risk, and Bank Profitability: Evidence of Angolan Banks

Corruption, Credit Risk, and Bank Profitability: Evidence of Angolan Banks
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Author(s): João Jungo (University of Aveiro, Portugal), Wilson Luzendo (Banco de Desenvolvimento de Angola, Angola), Yuri Quixina (Instituto Superior Politécnico de Tecnologias e Ciências (ISPTEC), Angola) and Mara Madaleno (GOVCOPP, University of Aveiro, Portugal)
Copyright: 2022
Pages: 16
Source title: Handbook of Research on New Challenges and Global Outlooks in Financial Risk Management
Source Author(s)/Editor(s): Mara Madaleno (GOVCOPP, University of Aveiro, Portugal), Elisabete Vieira (GOVCOPP, University of Aveiro, Portugal) and Nicoleta Bărbuță-Mișu (University of Galati, Romania)
DOI: 10.4018/978-1-7998-8609-9.ch005

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Abstract

The economies of African countries are generally characterized by inefficient management of resources, strong heterogeneity in the rate of economic growth, as well as high levels of corruption and embezzlement of public funds, clearly highlighting the need to consider the role of government in the performance of the economic environment. Corruption is characterized by three key behaviors—bribery, embezzlement, and nepotism—characteristics that can influence the performance of any financial system. The objective is to examine the effect of corruption on credit risk in Angola. The result of the feasible generalized least squares (FGLS) estimation suggests that corruption increases non-performing loans in the Angolan economy; additionally, the authors find that the larger the bank's assets (bank size), the more averse to credit risk they become, and the smaller the state's stake in the banking system, the lower the non-performing loans.

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