Strategic Management of Risk by Multinational Banks in Sub Saharan Africa

Kibs Boaz Muhanguzi

doi:doi:10.11648/j.ijfbr.20220806.11

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Strategic Management of Risk by Multinational Banks in Sub Saharan Africa

Kibs Boaz Muhanguzi

Published in International Journal of Finance and Banking Research (Volume 8, Issue 6)

Received: 6 November 2022 Accepted: 21 November 2022 Published: 13 January 2023

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Abstract

In their search for profit maximization, multinational enterprises should adopt strategies that neutralize country risk effects. This paper seeks to establish whether country risk affects profitability of multinational banks in sub-Saharan Africa, and whether strategic decisions regarding ‘where to go’ for investment in terms of geographic diversification, and the ‘source of capital’ in terms of debt or equity financing, help mitigate country risk effects. Using panel data (2006-2020) of multinational banks in sub-Saharan Africa, and a two-step Systems Generalized Method of Moments (S-GMM) estimation technique, results find both short run and long run negative effect of country risk on profitability. Augmenting country risk with the two corporate strategy constructs, results show: first, a positive long run hedging effect of geographic diversification on country risk implying that increased geographic diversification strategy maximizes the bank’s long run profits irrespective of the level of country risk confronted. Second, on the source of funds strategy, augmenting country risk with equity financing raises profitability of banks than debt financing. This is so probably because equity finances hedge banks from risks from nationalization and expropriation. For multinational banks to guard from country risk, their geographic expansion should be financed using equity funds than debt.

Published in	International Journal of Finance and Banking Research (Volume 8, Issue 6)
DOI	10.11648/j.ijfbr.20220806.11
Page(s)	136-142
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Strategic Management, Multinational Banks, Corporate Strategy, Country Risk, Geographic Diversification, Debt and Equity Financing

References

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APA Style

Kibs Boaz Muhanguzi. (2023). Strategic Management of Risk by Multinational Banks in Sub Saharan Africa. International Journal of Finance and Banking Research, 8(6), 136-142. https://doi.org/10.11648/j.ijfbr.20220806.11

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ACS Style

Kibs Boaz Muhanguzi. Strategic Management of Risk by Multinational Banks in Sub Saharan Africa. Int. J. Finance Bank. Res. 2023, 8(6), 136-142. doi: 10.11648/j.ijfbr.20220806.11

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AMA Style

Kibs Boaz Muhanguzi. Strategic Management of Risk by Multinational Banks in Sub Saharan Africa. Int J Finance Bank Res. 2023;8(6):136-142. doi: 10.11648/j.ijfbr.20220806.11

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@article{10.11648/j.ijfbr.20220806.11,
  author = {Kibs Boaz Muhanguzi},
  title = {Strategic Management of Risk by Multinational Banks in Sub Saharan Africa},
  journal = {International Journal of Finance and Banking Research},
  volume = {8},
  number = {6},
  pages = {136-142},
  doi = {10.11648/j.ijfbr.20220806.11},
  url = {https://doi.org/10.11648/j.ijfbr.20220806.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20220806.11},
  abstract = {In their search for profit maximization, multinational enterprises should adopt strategies that neutralize country risk effects. This paper seeks to establish whether country risk affects profitability of multinational banks in sub-Saharan Africa, and whether strategic decisions regarding ‘where to go’ for investment in terms of geographic diversification, and the ‘source of capital’ in terms of debt or equity financing, help mitigate country risk effects. Using panel data (2006-2020) of multinational banks in sub-Saharan Africa, and a two-step Systems Generalized Method of Moments (S-GMM) estimation technique, results find both short run and long run negative effect of country risk on profitability. Augmenting country risk with the two corporate strategy constructs, results show: first, a positive long run hedging effect of geographic diversification on country risk implying that increased geographic diversification strategy maximizes the bank’s long run profits irrespective of the level of country risk confronted. Second, on the source of funds strategy, augmenting country risk with equity financing raises profitability of banks than debt financing. This is so probably because equity finances hedge banks from risks from nationalization and expropriation. For multinational banks to guard from country risk, their geographic expansion should be financed using equity funds than debt.},
 year = {2023}
}

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TY  - JOUR
T1  - Strategic Management of Risk by Multinational Banks in Sub Saharan Africa
AU  - Kibs Boaz Muhanguzi
Y1  - 2023/01/13
PY  - 2023
N1  - https://doi.org/10.11648/j.ijfbr.20220806.11
DO  - 10.11648/j.ijfbr.20220806.11
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 136
EP  - 142
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20220806.11
AB  - In their search for profit maximization, multinational enterprises should adopt strategies that neutralize country risk effects. This paper seeks to establish whether country risk affects profitability of multinational banks in sub-Saharan Africa, and whether strategic decisions regarding ‘where to go’ for investment in terms of geographic diversification, and the ‘source of capital’ in terms of debt or equity financing, help mitigate country risk effects. Using panel data (2006-2020) of multinational banks in sub-Saharan Africa, and a two-step Systems Generalized Method of Moments (S-GMM) estimation technique, results find both short run and long run negative effect of country risk on profitability. Augmenting country risk with the two corporate strategy constructs, results show: first, a positive long run hedging effect of geographic diversification on country risk implying that increased geographic diversification strategy maximizes the bank’s long run profits irrespective of the level of country risk confronted. Second, on the source of funds strategy, augmenting country risk with equity financing raises profitability of banks than debt financing. This is so probably because equity finances hedge banks from risks from nationalization and expropriation. For multinational banks to guard from country risk, their geographic expansion should be financed using equity funds than debt.
VL  - 8
IS  - 6
ER  -

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Author Information

Kibs Boaz Muhanguzi

Department of Finance and Accounting, College of Economics and Management, Kampala International University, Kansanga, Uganda

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APA Style

Kibs Boaz Muhanguzi. (2023). Strategic Management of Risk by Multinational Banks in Sub Saharan Africa. International Journal of Finance and Banking Research, 8(6), 136-142. https://doi.org/10.11648/j.ijfbr.20220806.11

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ACS Style

Kibs Boaz Muhanguzi. Strategic Management of Risk by Multinational Banks in Sub Saharan Africa. Int. J. Finance Bank. Res. 2023, 8(6), 136-142. doi: 10.11648/j.ijfbr.20220806.11

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AMA Style

Kibs Boaz Muhanguzi. Strategic Management of Risk by Multinational Banks in Sub Saharan Africa. Int J Finance Bank Res. 2023;8(6):136-142. doi: 10.11648/j.ijfbr.20220806.11

Copy | Download

@article{10.11648/j.ijfbr.20220806.11,
  author = {Kibs Boaz Muhanguzi},
  title = {Strategic Management of Risk by Multinational Banks in Sub Saharan Africa},
  journal = {International Journal of Finance and Banking Research},
  volume = {8},
  number = {6},
  pages = {136-142},
  doi = {10.11648/j.ijfbr.20220806.11},
  url = {https://doi.org/10.11648/j.ijfbr.20220806.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20220806.11},
  abstract = {In their search for profit maximization, multinational enterprises should adopt strategies that neutralize country risk effects. This paper seeks to establish whether country risk affects profitability of multinational banks in sub-Saharan Africa, and whether strategic decisions regarding ‘where to go’ for investment in terms of geographic diversification, and the ‘source of capital’ in terms of debt or equity financing, help mitigate country risk effects. Using panel data (2006-2020) of multinational banks in sub-Saharan Africa, and a two-step Systems Generalized Method of Moments (S-GMM) estimation technique, results find both short run and long run negative effect of country risk on profitability. Augmenting country risk with the two corporate strategy constructs, results show: first, a positive long run hedging effect of geographic diversification on country risk implying that increased geographic diversification strategy maximizes the bank’s long run profits irrespective of the level of country risk confronted. Second, on the source of funds strategy, augmenting country risk with equity financing raises profitability of banks than debt financing. This is so probably because equity finances hedge banks from risks from nationalization and expropriation. For multinational banks to guard from country risk, their geographic expansion should be financed using equity funds than debt.},
 year = {2023}
}

Copy | Download

TY  - JOUR
T1  - Strategic Management of Risk by Multinational Banks in Sub Saharan Africa
AU  - Kibs Boaz Muhanguzi
Y1  - 2023/01/13
PY  - 2023
N1  - https://doi.org/10.11648/j.ijfbr.20220806.11
DO  - 10.11648/j.ijfbr.20220806.11
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 136
EP  - 142
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20220806.11
AB  - In their search for profit maximization, multinational enterprises should adopt strategies that neutralize country risk effects. This paper seeks to establish whether country risk affects profitability of multinational banks in sub-Saharan Africa, and whether strategic decisions regarding ‘where to go’ for investment in terms of geographic diversification, and the ‘source of capital’ in terms of debt or equity financing, help mitigate country risk effects. Using panel data (2006-2020) of multinational banks in sub-Saharan Africa, and a two-step Systems Generalized Method of Moments (S-GMM) estimation technique, results find both short run and long run negative effect of country risk on profitability. Augmenting country risk with the two corporate strategy constructs, results show: first, a positive long run hedging effect of geographic diversification on country risk implying that increased geographic diversification strategy maximizes the bank’s long run profits irrespective of the level of country risk confronted. Second, on the source of funds strategy, augmenting country risk with equity financing raises profitability of banks than debt financing. This is so probably because equity finances hedge banks from risks from nationalization and expropriation. For multinational banks to guard from country risk, their geographic expansion should be financed using equity funds than debt.
VL  - 8
IS  - 6
ER  -

Copy | Download