Information Asymmetry and Market Power in the African Banking Industry

Journal of Multinational Financial Management, 44(March), pp. 69-83 (2018)

29 Pages Posted: 8 Sep 2016 Last revised: 21 Mar 2018

See all articles by Agyenim Boateng

Agyenim Boateng

Glasgow Caledonian University

Simplice Asongu

African Governance and Development Institute

Raphaël K. Akamavi

Hull University Business School (HUBS)

Vanessa S. Tchamyou

African Governance and Development Institute

Date Written: September 4, 2016

Abstract

This study investigates the role of information sharing offices and its association with market power in the African banking industry. The empirical evidence is based on a panel of 162 banks from 42 countries for the period 2001-2011. Five simultaneity-robust estimation techniques are employed, namely: (i) Two Stage Least Squares; (ii) Instrumental Fixed effects to control for the unobserved heterogeneity; (iii) Instrumental Tobit regressions to control for the limited range in the dependent variable; (iv) Generalised Method of Moments (GMM) to control for persistence in market power and (v) Instrumental Quantile Regressions (QR) to account for initial levels of market power.

The following findings have been established from non-interactive regressions. First, the effects of information sharing offices are significant in Two Stage Least Squares, with a positive effect from private credit bureaus. Second, in GMM, public credit registries increase market power. Third, from Quintile Regressions, private credit bureaus consistently increase market power throughout the conditional distributions of market power.

Given that the above findings are contrary to theoretical postulations, we extended the analytical framework with interactive regressions in order to assess whether the anticipated effects can be established if information sharing offices are increased. The extended findings show a: (i) negative net effect from public credit registries on market power in GMM regressions and; (ii) negative net impacts from public credit registries on market power in the 0.25th and 0.50th quintiles of market power.

Keywords: Financial Access; Market Power; Information Asymmetry

JEL Classification: G20; G29; L96; O40; O55

Suggested Citation

Boateng, Agyenim and Asongu, Simplice and Akamavi, Raphaël K. and S. Tchamyou, Vanessa, Information Asymmetry and Market Power in the African Banking Industry (September 4, 2016). Journal of Multinational Financial Management, 44(March), pp. 69-83 (2018). Available at SSRN: https://ssrn.com/abstract=2834710 or http://dx.doi.org/10.2139/ssrn.2834710

Agyenim Boateng

Glasgow Caledonian University ( email )

Scotland
United Kingdom

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Raphaël K. Akamavi

Hull University Business School (HUBS)

Hull, HU6 7RX
United Kingdom

Vanessa S. Tchamyou

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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