Abstract
Banks play a crucial intermediary role in channelling savings to investments, making them essential for
economic development, particularly within the African context, where a well-functioning banking
sector is necessary for improved economic outcomes. As a result, this thesis investigates the
multifaceted determinants of bank performance and systemic financial risk in African economies,
providing four distinct but interconnected empirical contributions. The first contribution employs a
variance component model to uncover the relative importance of time, firm, and country-specific effects
on the performance of 37 African banks from 2004 to 2021. The results reveal that time-specific factors
exert the greatest influence on performance variability, followed by country and bank-level effects.
Moreover, the interaction between high leverage ratios and explicit deposit insurance schemes is shown
to adversely affect performance, underscoring the need for regulatory alignment between capital
adequacy and insurance design. The second contribution explores the nexus between political
uncertainty and systemic risk using data from 36 African countries between 2000 and 2020.
Disaggregating systemic risk into six components (bank solvency risk, bank liquidity risk, household
solvency risk, household liquidity risk, mispricing risk, and corporate solvency risk), the study identifies
fiscal policy as a key mediating mechanism through which political risk impacts systemic risk. A
reduction in political uncertainty enhances fiscal stability, which, in turn, lowers systemic risks
emanating from both the banking and corporate sectors. The findings advocate for regional monetary
and fiscal coordination to buffer financial systems against political turbulence. The third contribution
assesses the influence of financial technology risk on banking sector dynamics using a PVAR model
for 41 banks across 11 African economies between 2004 and 2020. Results reveal that Fintech-induced
financial stress, proxied by the Fintech Financial Stress Indicator, produces asymmetric effects on
banks’ profitability and stability, suggesting that technological innovation can enhance performance
when supported by sound regulatory oversight to curb excessive risk-taking. Finally, the fourth
contribution investigates the transmission mechanisms through which climate change risk propagates
systemic financial instability in Africa. Using feasible generalised least squares estimations on panel
data from 2000 to 2020, the study finds that transition risks dominate physical risks in amplifying
systemic vulnerabilities. Economic policy uncertainty, fiscal imbalances, insurance penetration, and
tourism activity emerge as significant mediating channels. The results emphasise the necessity of
climate-aligned fiscal and regulatory frameworks to strengthen financial systems’ resilience.
Collectively, these four essays contribute to the literature on financial stability in emerging markets by
highlighting the complex links between institutional, macroeconomic, technological, and
environmental risks shaping Africa’s banking landscape. Policy implications emerging from these
studies underscore the necessity of implementing deposit insurance alongside improved capitalisation,
insulating fiscal policy from political interference, promoting responsible technological innovation...