The regional informational efficiency of African banking sector

Purpose The study examines the African banking sector’s regional informational efficiency and explores the factors influencing its efficiency in incorporating regional information. Design/methodology/approach The paper adopts variance decomposition and state-space techniques to estimate information diffusion. It relies on data from fifteen (15) African countries from 2002 to 2022. Findings The evidence reveals that the African banking sector’s regional informational efficiency is time-varying and varies from country to country. Additionally, the African banking sector securities are generally efficient in impounding regional information. Further, banking sector development, inflation, financial market development, political stability, voice and accountability, and integration affect the efficiency in impounding regional information into the African banking sector security prices. Research limitations/implications Regional factors describe the informational efficiency of the African banking sector and thus have implications for security prices, project cost of capital, and the benefits of diversifying into the African banking sector. It also has consequences for cross-border resource allocation, crisis transmission and financial stability. Originality/value The study examines the African banking sector’s responsiveness to regional news and the factors that drive such efficiency