Bank Size, Information Sharing and Financial Access in Africa

International Journal Managerial Finance, 14 (2), pp.188-209 (April, 2018)

AGDI Working Paper, WP/17/044

30 Pages Posted: 23 Oct 2017 Last revised: 1 May 2018

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Jacinta Nwachukwu

Coventry University

Date Written: October 22, 2017

Abstract

Purpose - This study investigates how bank size affects the role of information asymmetry on financial access in a panel of 162 banks in 39 African countries for the period 2001-2011.

Design/methodology/approach - The empirical evidence is based on instrumental variable Fixed Effects regressions with overlapping and non-overlapping bank size thresholds to control for the QLH (Quiet Life Hypothesis). The QLH postulates that managers of large banks will use their privileges for private gains at the expense of making financial services more accessible to the general public. Financial access is measured with loan price and loan quantity whereas information asymmetry is implicit in the activities of public credit registries and private credit bureaus.

Findings - The findings with non-overlapping thresholds are broadly consistent with those that are conditional on overlapping thresholds. First, public credit registries have a decreasing effect on the price of loans with the magnitude of reduction comparable across all bank size thresholds. Second, both public credit registries and private credit bureaus enhance the quantity of loans. Third, compared with public credit registries, private credit bureaus have a greater influence in increasing financial access because they have a significantly higher favourable effect on the quantity and price of loans Fourth, the QLH is not apparent because large banks are not associated with lower levels of financial access compared to small banks.

Originality/value - Studies of public credit registries and private credit bureaus in Africa are sparse. This is one of the few to assess linkages between bank size, information asymmetry and financial access.

Keywords: Public goods; Financial access; Bank size; Information sharing

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

Suggested Citation

Asongu, Simplice and Nwachukwu, Jacinta, Bank Size, Information Sharing and Financial Access in Africa (October 22, 2017). AGDI Working Paper, WP/17/044. Available at SSRN: https://ssrn.com/abstract=3056947

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Jacinta Nwachukwu

Coventry University ( email )

Priory Street
Coventry, CV1 5FB
United Kingdom

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