Purpose This study aims to investigate the relationship between financial development, institutional quality and economic performance in sub-Saharan Africa (SSA). It further examines how institutional strength conditions the growth effects of financial development, with particular attention to potential non-linear dynamics in the finance–growth nexus. Design/methodology/approach Using a dynamic panel framework, the analysis uses data for 46 SSA countries over the period 2010–2023 and applies the two-step system generalised method of moments (system-GMM) estimator to address endogeneity, unobserved heterogeneity and persistence in economic performance. The study estimates the direct effects of financial development and institutional quality, as well as their interaction, while controlling for key structural factors. Findings The results show that financial development has a positive and statistically significant effect on economic performance in SSA, particularly when supported by stronger institutional quality. The interaction between financial development and institutions indicates that institutional strength amplifies the growth-enhancing role of finance. However, no empirical evidence of non-linear effects is found, suggesting that most SSA economies remain below the level at which financial deepening could generate diminishing returns. Robustness checks, including the exclusion of financially advanced SSA countries, confirm the stability of the core findings. Originality/value This study contributes to the finance–growth literature by jointly examining financial development, institutional quality and non-linear dynamics within a unified empirical framework for SSA. It provides recent regional evidence demonstrating that institutional quality acts as a critical transmission channel through which financial development influences growth, while also showing that concerns about excessive financial deepening may be less relevant for developing African economies. The findings offer policy-relevant insights emphasising the need for coordinated financial and institutional reforms to achieve sustained economic growth.
Ogbodo et al. (Wed,) studied this question.
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