Demystifying the Role of Governance Quality and Fiscal Space on Nonperforming Loans in Zimbabwe
Article Sidebar
Main Article Content
Abstract
The paper examines the effects of governance quality and fiscal space on
non-performing loans (NPLs) in Zimbabwe. We estimated pooled ordinary least squares
(OLS) and quadratic regressions with panel-corrected standard errors (PCSE) and
Driscoll-Kraay standard errors using the full dollarisation era dataset for 13 banks from
2009 to 2017. We noted that all the governance indicators are on average negative (bad)
and that improvement in the rule of law, political stability and control of corruption
stimulates reduction in NPLs if the indicators improve beyond -1.654, -0.876 and
-1.361, respectively. More interestingly, the results revealed that an improvement in
the interaction terms of political stability and control of corruption with rule of law,
governance index and voice and accountability significantly reduces NPLs, which is
new empirical evidence in the literature. Regarding fiscal space, we find evidence that
fiscal balance positively and significantly affects NPLs. We contribute to the literature
by providing new evidence on the role of governance quality in NPLs formation in
Zimbabwe, especially when corruption and political stability interact with all governance
indicators. We recommend that the Zimbabwean government improve political stability,
control of corruption, voice and accountability and the rule of law to reduce NPLs.
Downloads
Article Details
Submission of a manuscript implies: that the work described is original, has not been published before (except in the form of an abstract or as part of a published lecture, review, or thesis); that is not under consideration for publication elsewhere; that its publication has been approved by all co-authors, if any, as well as tacitly or explicitly by the responsible authorities at the institution where the work was carried out. Transfer of copyright to the University of Malaya becomes effective if and when the article is accepted for publication. The copyright covers the exclusive right to reproduce and distribute the article, including reprints, translations, photographic reproductions, microform, electronic form (offline and online) or other reproductions of similar nature.
An author may self-archive the English language version of his/her article on his/her own website and his/her institutions repository; however he/she may not use the publishers PDF version which is posted on www.ijie.um.edu.my. Furthermore, the author may only post his/her version, provided acknowledgement is given to the original source of publication and a link must be accompanied by the following text: The original publication is available at www.ijie.um.edu.my.
All articles published in this journal are protected by copyright, which covers the exclusive rights to reproduce and redistribute the article (e.g. as offprint), as well as all translation rights. No material published in this journal may be reproduced photographically or stored on microfilm, in electronic database, video disks, etc., without first obtaining written permission from the publishers. The use of general descriptive names, trade names, trademarks, etc., in this publication, even if not specifically identified, does not imply that these names are not protected by the relevant laws and regulations.
The copyright owners consent does not include copying for general distribution, promotion, new works, or resale. In these cases, specific written permission must first be obtained from the publishers.