11 November 2020

Financial performance and Corporate Governance: Evidence from National Development Banks in Africa

This is a draft discussion paper and has not been through an external peer review process. A final ODI working paper will be published after the research conference.

This study aims to examine the extent to which governance of national development banks (NDBs) in Africa affects their financial performance. The authors combine in-depth descriptive analysis with a quantitative analysis based on a sample of 33 banks, drawn from a dataset of over 100 identified African NDBs. They explore the governance and financial trends that characterise these diverse banks, then use an econometric analysis to measure the impact of political influence in governance. They find key measures of political influence, particularly political appointments, have a strongly negative impact for financial performance, as well as the risk-appetite for banks. Additionally, They find this effect is stronger in countries where the enabling environment is weaker. The authors conclude that increasing institutional distance between government ownership and management of banks may have a positive influence for financial performance.

This Research Paper is published in the framework of the International Research Initiative on Public Development Banks working groups and released for the occasion of the 14th AFD International Research Conference on Development

It is part of the pilot research program “Realizing the Potential of Public Development Banks for Achieving Sustainable Development Goals”. This program was launched, along with the International Research Initiative on Public Development Banks (PDBs), by the Institute of New Structural Economics (INSE) at Peking University, and sponsored by the Agence française de développement (AFD), Ford Foundation and International Development Finance Club (IDFC).

Have a look on the key findings for a quick overview of the research results (coming soon)

See the video pitch