Marfo-Yiadom, Edward2024-09-122024-09-122022Marfo-Yiadom, Edward. (2022). Essays on innovations, national culture, and banking system stability [PhD thesis, University of the Witwatersrand, Johannesburg]. WireDSpace.https://hdl.handle.net/10539/40756https://hdl.handle.net/10539/40756Doctoral thesis submitted in fulfillment of the requirements for the award of the degree of Doctor of Philosophy The Graduate School of Business Administration University of the Witwatersrand, Johannesburg 2022One of the crucial imperatives to safeguard the stability of macroeconomic frameworks of nations is the financial architecture. The financial system guarantees the flow of financial resources to economic agents and empowers governments to undertake investments, infrastructural development, and sustainable economic development. Nations that have advanced the culture of harnessing financial resources into productivity growth are the known to be experiencing economic affluence. It is incontrovertibly evidenced that the growth in financial resources can augment the capability of nations to promote technological innovation and eventually engender national development. However, banks have become universally susceptible to competition and demonstrate reckless intermediation behaviour. The possibility of high risk taking in the wake of a boost in liquidity can increase the level of instability in the banking infrastructure. Notwithstanding that, the culture of the societies within which banks operate can function as a catalyst for the evolution of credit into sustainable and innovative projects, which can increase the efficiency and effectiveness of banks and strengthen them to weather liquidity shocks. This thesis was setup to examine whether the culture of 107 nations can ignite the innovative tendencies of firms due to the recent intensification of credit to the private sector, advancement in technological innovations, and the amplified transparency of the financial system. The thesis employed the system Generalised Method of Moments to develop three objectives into self-contained empirical chapters. The first chapter examined whether the income level of nations, which is also a measure of technological advancement, can propel nations to use explosions in financial resources to improve the soundness of the banking system. Even though income clubs were found to be crucial in the relationship between financial innovations and economic growth, the chapter did not establish how the informal institutions that define the values, norms, aspirations, and attitudes of the territories where banks operate can affect the channels through which financial innovations affect the soundness of the banking system. The second objective, therefore, examined the role of the six dimensions of Hofstede’s national culture in the nexus of financial innovation and stability of banks. The last objective analysed the role of national culture in banking system stability. This study considered how information sharing systems, which are avenues for financial transparency and institutional innovation, can feature in the financial intermediation role of banks. The results show that financial innovation has a strong positive impact on bank stability for the 107 countries covered in this study. The positive effect of financial innovation on bank stability is even stronger from upper middle-income countries. The study did not establish any relationship between financial innovation and bank stability in high-income countries and lower-middle income countries. In terms of technological innovation, ATM coverage has positive effect on bank stability in high-income countries and upper-middle income countries. The results for financial innovation were robust even after the inclusion of period dummies. In the second chapter, the study found that the national cultural dimensions influence the relationship between financial innovation and bank stability. Indulgence, long-term orientation, and power distance were found to have strong substitution effect on the relationship between financial innovation and bank stability. This connotes that countries with high level of the three cultural tendencies can achieve banking system stability in the wake of financial expansion. Similarly, countries with above average level of uncertainty avoidance can complement the proliferation of finance into banking sector soundness. In the third chapter, it was discovered that countries with high levels of indulgence and masculinity can nurture financial transparency into banking system stability. These findings highlight the imperative for intermediation strategies of banks in host countries to incorporate the cultural orientations and technological advancement of the communities within which they operate, to guarantee the effectiveness and efficiency in directing financial resources to productivity and induce the soundness or stability of the banking system as well as strengthen the overall macroeconomicen© 2022 University of the Witwatersrand, Johannesburg. All rights reserved. The copyright in this work vests in the University of the Witwatersrand, Johannesburg. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of University of the Witwatersrand, Johannesburg.Bank StabilityGeneralised Method of MomentsInnovationNational CulturePer Capita Income ClubsSDG-8: Decent work and economic growthThesisUniversity of the Witwatersrand, Johannesburg