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Bank Recapitalization And Market Concentration In Ghana’S Banking Industry: A Herfindahl-Hirschman Index Analysis

Author

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  • Samuel Yaw Akomea
  • Michael Adusei

Abstract

Using Concentration Ratio and Herfindahl-Hirschman Index techniques, the paper investigates the concentration levels of the banking industry in Ghana and forecasts the future concentration levels of the industry should consolidations triggered by the new bank recapitalization policy occur in the industry. The study finds that the HHI indices provide evidence for the contention that for the past eight years the banking industry in Ghana has been highly competitive with no signs of concentration. Evidence also exists to underpin the conclusion that any consolidation of four banks or less stimulated by the new bank recapitalization policy will not upset the existing market concentration. However, consolidation of five or more banks will culminate in high concentration which will be inimical to the interest of customers. The paper, therefore, recommends that, all things being equal, policy makers should permit consolidation of four or less banks if that is the only way the banks will meet the new bank recapitalization requirement.

Suggested Citation

  • Samuel Yaw Akomea & Michael Adusei, 2013. "Bank Recapitalization And Market Concentration In Ghana’S Banking Industry: A Herfindahl-Hirschman Index Analysis," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 7(3), pages 31-45.
    • Handle: RePEc:ibf:gjbres:v:7:y:2013:i:3:p:31-45
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    Citations

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    Cited by:

    1. Algirdas Krivka, 2016. "On the Concept of Market Concentration, the Minimum Herfindahl-Hirschman Index, and Its Practical Application," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(5), pages 525-540, December.

    More about this item

    Keywords

    Banking; Market Concentration; Herfindahl-Hirschman Index; Ghana;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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