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This study aims to investigate the influence of banking consolidations on bank stability in Sub-Saharan African (SSA) countries for the period 2003–2019, following a series of bank mergers and acquisitions (M&As) in the region and whether regulation-induced bank M&As affect banking sector stability.

The fixed effect panel regression model is used to understand the influence of regulation-induced and voluntary bank mergers and acquisitions on banking stability in SSA. The study also controlled for bank-specific factors, market concentration and macroeconomic variables that affect banking stability. The study used three measures of bank stability: the Z-score, risk-adjusted return on assets and risk-adjusted bank capital.

The study results reveal that voluntary bank M&As, market concentration, net interest margin, bank capital, bank deposits and income diversification influence banking sector stability positively. However, the findings show that regulation-induced bank mergers and acquisitions impact banking stability negatively. Where bank M&As were a result of banking regulatory reforms, called regulation-induced mergers and acquisitions (RIM&As), banking stability suffered, but voluntary bank M&As improved banking stability. Again, the study supports the concentration–stability argument rather than the competition–stability hypothesis. Therefore, more concentrated banking markets in SSA countries have more stable banks and fewer risks of system-wide bank failures. Other factors influencing banking stability in SSA are return on equity, bank efficiency (cost-to-income), bank size and deposits-to-assets ratio. However, their relationship is negative with the stability of the banking sector.

The findings imply that the regulatory authorities should encourage voluntary bank M&As and not regulation-induced bank M&As to improve the stability of the banking systems in SSA.

The study provides new evidence on the effects of regulation-induced bank M&As on the stability of banks.

In this study, the authors present unique evidence on bank lending types by paying particular attention to the factors that drive the different types of bank lending in Africa using bank level data.

In presenting such evidence, the study employs a robust fixed effect panel data with year and technological controls comprising 57 banks from 29 African economies between 2006 and 2015.

The results show that different factors affect different bank lending types differently in Africa. Specifically, while the authors find that total or aggregate bank lending is positively driven by bank capitalization and spread but negatively driven by bank size, corporate and commercial bank lending is positively driven by bank size, spread, inflation, elections and extent of business disclosure but negatively driven by bank capitalization, loan loss reserves, operational cost and gross domestic product per capita. Moreover, interbank lending is both negatively and positively driven by bank capitalization and size, respectively, while other bank lending type is driven positively by financial crisis but negatively driven by bank size, inflation and extent of business disclosure. Finally, retail and consumer lending is positively driven by bank capitalization, loan loss reserves and spread while negatively driven by bank size and inflation.

These imply that bank managers, regulators, policymakers and researchers must begin to see each bank lending category separately and independently since varying factors influence the different categories of bank lending differently.

The study presents new insights into how different factors determine different lending types in Africa for the first time to the best of the authors’ knowledge.