Information Asymmetry and Financial Development Dynamics in Africa

Review of Development Finance, 6(2), pp. 126-138 (December, 2016)

25 Pages Posted: 27 Jun 2015 Last revised: 6 Jan 2017

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Jacinta Nwachukwu

University of Huddersfield - Business School

Vanessa S. Tchamyou

African Governance and Development Institute

Date Written: June 26, 2015

Abstract

We examine policy thresholds of information sharing for financial development in 53 African countries for the period 2004-2011. Public credit registries (PCR) and private credit bureaus (PCB) are used as proxies for reducing information asymmetry whereas financial development includes all financial dimensions identified by the Financial Development and Structure Database (FDSD) of the World Bank, namely: depth, efficiency, activity and size. The empirical evidence is based on interactive Generalised Methods of Moments with forward orthogonal deviations. The following findings are established. First, PCR and PCB have negative effects on financial depth, with the magnitude of the former higher. Second, contrary to PCR which have insignificant effects, PCB has a negative impact on banking system efficiency. Third, PCR and PCB have negative impacts on financial activity, with the magnitude of the latter higher. Moreover, their marginal effects are negative. Fourth, PCR and PCB have positive effects on financial size, with the effect of the former higher. While marginal effects are positive, corresponding thresholds are not within range. Policy implications are discussed.

Keywords: Information Asymmetry; Financial Development

JEL Classification: G20, G29, O16, O55

Suggested Citation

Asongu, Simplice and Nwachukwu, Jacinta C. and S. Tchamyou, Vanessa, Information Asymmetry and Financial Development Dynamics in Africa (June 26, 2015). Review of Development Finance, 6(2), pp. 126-138 (December, 2016). Available at SSRN: https://ssrn.com/abstract=2623467 or http://dx.doi.org/10.2139/ssrn.2623467

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Jacinta C. Nwachukwu

University of Huddersfield - Business School ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

Vanessa S. Tchamyou

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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