Bank Competition in Africa: Do Institutional Quality and Cross-border Banking Matter?
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Date
2020
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Volume Title
Publisher
Journal of African Business
Abstract
This paper analyses the implications of cross-border banking (CBB)
and institutional quality (IQ) for bank competition in Africa. It
applies a two-step estimation procedure using bank-level panel
data for 29 African countries. In step one, the Boone indicator and
the Lerner index are used to gauge bank competition in a given
country in Africa. In the second step, it analyzes the sources of bank
competition, placing emphasis on the impact of CBB and IQ. The
results suggest that competition increased in the period of
2002–2005, before decreasing somewhat between 2006 and 2007
and increasing again thereafter. The results also show that cross-border banking enhances bank competition in African countries
with stronger governance structures and institutional quality.
These results are robust to an array of controls, including an alternative methodology, variable specifications, and the regulatory
environments that banks operate in.
Description
Research Article
Keywords
Banks, developing Countries, institutional quality