Bank Efficiency and Openness in Africa: Do Income Levels Matter?

Published in: Review of Finance and Banking, 4(2), pp. 115-122 (2012).

18 Pages Posted: 9 Sep 2014 Last revised: 1 Apr 2015

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Date Written: December 1, 2010

Abstract

This paper integrates a previously missing wealth-effect component in the openness-finance debate. From a panel of 29 low and middle income African countries with data spanning from 1987 to 2008, we provide evidence that openness (trade and financial) triggers less bank efficiency in low income countries than in their middle income counterparts. These findings justify the absence of a banking comparative advantage and consequently, the issue of over-liquidity resulting from low funding of economic operators with mobilized financial deposits. In terms of policy implications, globalization increases economic cost of banks in sampled countries, with trade openness more detrimental than financial openness. Banks in middle income countries play a greater role in financing activities resulting from trade openness than those in low income countries. Also, a lot needs to be done on the improvement of infrastructures that curtails information asymmetry in the banking industry.

Keywords: Banking; Intermediation Efficiency; Openness; Panel Data; Africa

JEL Classification: F10; G20; I30

Suggested Citation

Asongu, Simplice, Bank Efficiency and Openness in Africa: Do Income Levels Matter? (December 1, 2010). Published in: Review of Finance and Banking, 4(2), pp. 115-122 (2012). . Available at SSRN: https://ssrn.com/abstract=2492816 or http://dx.doi.org/10.2139/ssrn.2492816

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
53
Abstract Views
314
rank
403,152
PlumX Metrics