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Competition and Efficiency in Banking

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Author Info

  • Johan Mathisen
  • Thierry D. Buchs

Abstract

This paper assesses the degree of bank competition and discusses efficiency with regard to banks'' financial intermediation in Ghana. By applying panel data to variables derived from a theoretical model, we find evidence for a noncompetitive market structure in the Ghanaian banking system, which may be hampering financial intermediation. We argue that the structure, as well as the other market characteristics, constitutes an indirect barrier to entry thereby shielding the large profits in the Ghanaian banking system.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/17.

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Length: 26
Date of creation: 01 Jan 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/17

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Keywords: Economic models; banking; competition; banking sector; banking system; banking industry; state owned bank; return on assets; monopolistic competition; bank competition; banking systems; reserve ratio; monopoly; degree of competition; banks ? loan; foreign exchange; corporate banking; barrier to entry; market concentration; bank for international settlements; monopolistic structure; bank profitability; limited competition; perfect competition; capital adequacy; bank policy; bank branches; bank lending; bank share; return on equity; nonperforming loan; banking services; banking business; bank balance sheets; minimum capital standard; banking markets; banking structure; bank loans; bank regulation; interest expense; bank market; automated teller; macroeconomic stability; bank assets; demand deposit; banking sectors; capital adequacy ratio; banking system assets; small bank; country comparison; net interest margin; bank branch; banking institutions; bank credit; banking statistics; loan classification; bank structure; banking infrastructure; competitive structure; bank deposits; bank intermediation; bank supervisors;

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References

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  1. Eduardo Levy Yeyati & Alejandro Micco, 2003. "Concentration and Foreign Penetration in Latin American Banking Sectors: Impact on Competition and Risk," IDB Publications 6514, Inter-American Development Bank.
  2. Semih Yildirim & George C. Philippatos, 2003. "Competition And Contestability In Central And Eastern European Banking Markets," Finance, EconWPA 0310004, EconWPA.
  3. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(4), pages 443-56, June.
  4. Hempell, Hannah S., 2002. "Testing for Competition Among German Banks," Discussion Paper Series 1: Economic Studies 2002,04, Deutsche Bundesbank, Research Centre.
  5. Kaushik Bhattacharya, 2003. "How good is the BankScope database? A cross-validation exercise with correction factors for market concentration measures," BIS Working Papers 133, Bank for International Settlements.
  6. Claessens, Stijn & Laeven, Luc, 2003. "What drives bank competition? some international evidence," Policy Research Working Paper Series 3113, The World Bank.
  7. Xavier Vives, 2001. "Competition in the Changing World of Banking," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 17(4), pages 535-547.
  8. Gaston Gelos & Jorge Roldos, 2002. "Consolidation and Market Structure in Emerging Market Banking Systems," IMF Working Papers 02/186, International Monetary Fund.
  9. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  10. Paolo Coccorese, 2002. "Competition Among Dominant Firms in Concentrated Markets: Evidence from the Italian Banking Industry," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 89, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  11. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, Elsevier, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  12. Molyneux, Phil & Lloyd-Williams, D. M. & Thornton, John, 1994. "Competitive conditions in european banking," Journal of Banking & Finance, Elsevier, Elsevier, vol. 18(3), pages 445-459, May.
  13. Hondroyiannis, George & Lolos, Sarantis & Papapetrou, Evangelia, 1999. "Assessing competitive conditions in the Greek banking system," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 9(4), pages 377-391, November.
  14. Nicola Cetorelli, 1999. "Competitive analysis in banking: appraisal of the methodologies," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q I, pages 2-15.
  15. J.A. Bikker & J.M. Groeneveld, 1998. "Competition and Concentration in the EU Banking Industry," Research Series Supervision (discontinued), Netherlands Central Bank, Directorate Supervision 8, Netherlands Central Bank, Directorate Supervision.
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Citations

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Cited by:
  1. Rezitis, Anthony N., 2010. "Evaluating the state of competition of the Greek banking industry," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 20(1), pages 68-90, February.
  2. David Hauner & Shanaka J. Peiris, 2005. "Bank Efficiency and Competition in Low-Income Countries," IMF Working Papers 05/240, International Monetary Fund.
  3. Honohan, P. & Beck, T.H.L., 2007. "Making finance work for Africa," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125420, Tilburg University.
  4. Aryeetey, Ernest & Kanbur, Ravi, 2006. "Ghana’s Economy at Half Century: An Overview of Stability, Growth and Poverty," Working Papers, Cornell University, Department of Applied Economics and Management 127036, Cornell University, Department of Applied Economics and Management.
  5. Phil Molyneux & Hong Liu & John O.S. Wilson, 2010. "Measuring Competition and Stability: Recent Evidence for European Banking," Working Papers 10020, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  6. International Monetary Fund, 2005. "Competition in Indian Banking," IMF Working Papers 05/141, International Monetary Fund.
  7. Arto Kovanen, 2011. "Monetary Policy Transmission in Ghana," IMF Working Papers 11/275, International Monetary Fund.
  8. Turk-Ariss, Rima, 2009. "Competitive behavior in Middle East and North Africa banking systems," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 49(2), pages 693-710, May.
  9. Jérôme Vacher & Samer Y. Saab, 2007. "Banking Sector Integration and Competition in CEMAC," IMF Working Papers 07/3, International Monetary Fund.
  10. James Heintz & Gerald Epstein, 2006. "Monetary Policy and Financial Sector Reform For Employment Creation and Poverty Reduction in Ghana," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp113, Political Economy Research Institute, University of Massachusetts at Amherst.
  11. Gerald Epstein & James Heintz, 2006. "Monetary Policy and Financial Sector Reform for Employment Creation and Poverty Reduction in Ghana," Country Study, International Policy Centre for Inclusive Growth 2, International Policy Centre for Inclusive Growth.

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