Bank Competition in Africa: Do Institutional Quality and CrossBorder Banking Matter?
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Date
2020-07-03
Authors
Amidu, Mohammed
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research consortium
Abstract
This study analyses the implications of cross-border banking (CBB) and
institutional quality (IQ) for bank competition in Africa. We apply 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, we analyse the
sources of bank competition, placing emphasis on the impact of CBB and IQ.
The results suggest that competition increased in the period 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.
Our results are robust to an array of controls, including an alternative methodology,
variable specifications, and the regulatory environments that banks operate in.