Market power and cost efficiency in the African banking industry

Arbeitspapier

Purpose- In this study, we test the so-called 'Quiet Life Hypothesis' (QLH) which postulates that banks with market power are less efficient. Design/methodology/approach- We employ instrumental variable Ordinary Least Squares, Fixed Effects, Tobit and Logistic regressions. The empirical evidence is based on a panel of 162 banks consisting of 42 African countries for the period 2001-2011. There is a two-step analytical procedure. First, we estimate Lerner indices and cost efficiency scores. Then, we regress cost efficiency scores on Lerner indices contingent on bank characteristics, market features and the unobserved heterogeneity. Findings- The empirical evidence does not support the QLH because market power is positively associated with cost efficiency. Originality/value- Owing to data availability constraints, this is one of the few studies to test the QLH in African banking.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: AGDI Working Paper ; No. WP/19/080

Classification and Topics

• Classification: Wirtschaft ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Monetary Policy ; Central Banks and Their Policies ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: Finance ; Savings banks ; Competition ; Efficiency ; Quiet life hypothesis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Asongu, Simplice ; Nting, Rexon T. ; Nnanna, Joseph
• Event: Veröffentlichung
• (who): African Governance and Development Institute (AGDI)
• (where): Yaoundé
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/227958
• Last update: 10.03.2025, 11:43 AM CET