Assessing the impact of bank recapitalization and public debt overhang on financial inclusion in Africa: Evidence on the moderating influence of governance quality
Keywords:
Recapitalization, Public Debt, Financial Inclusion, Governance Quality, financial stability, economic growthAbstract
This study investigates the influence of governance quality as a moderating effect of bank recapitalization and public debt overhang on financial inclusion in Africa. The research employs a variety of econometric estimation techniques, such as the two-step Generalized Method of Moments (GMM) estimator, the Hausman test, the Random Effects Model, and Ordinary Least Squares (OLS), to ensure robustness and address potential endogeneity issues, utilizing panel data from the World Development Indicators (WDI) from 2003 to 2024.The results indicate that financial inclusion is substantially influenced by bank recapitalization; however, the magnitude of this effect is contingent upon the quality of governance. In the same vein, financial inclusion is adversely affected by the burden of public debt overhang; however, this effect is mitigated by robust governance mechanisms. The interaction terms suggest that governance quality mitigates the adverse consequences of public debt overhang and augments the beneficial effects of bank recapitalization. The study advocates for the implementation of more stringent regulatory frameworks to guarantee that bank recapitalization initiatives result in a more comprehensive financial inclusion. Future studies could examine how macroeconomic shocks like inflation and currency rate volatility affect bank recapitalisation and financial inclusion
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Copyright (c) 2025 Nicholas Bamegne Nambie, Evans O.N.D Ocansey, Opoku K. Ababio
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