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Efficiency And Competition In The Ghanaian Banking Industry: A Panel Granger Causality Approach

Author

Listed:
  • KOFI ADJEI-FRIMPONG

    (Faculty of Commerce, Department of Accounting, Economics and Finance, PO Box 84, Lincoln University, Canterbury, New Zealand)

  • CHRISTOPHER GAN

    (Faculty of Commerce, Department of Accounting, Economics and Finance, PO Box 84, Lincoln University, Canterbury, New Zealand)

  • BAIDING HU

    (Faculty of Commerce, Department of Accounting, Economics and Finance, PO Box 84, Lincoln University, Canterbury, New Zealand)

Abstract

This study examines the causal link between bank efficiency and bank competition. The study estimates bank competition with the Lerner index and bank cost efficiency with data envelopment analysis using annual data over the period 2001–2010. Using system generalized method of moments (system GMM) estimator, the results suggest that bank cost efficiency positively Granger-causes market power and hence causality negatively runs from bank cost efficiency to bank competition indicating that bank cost efficiency precedes bank competition. However, the reverse causality running from bank competition to bank cost efficiency is not supported.

Suggested Citation

  • Kofi Adjei-Frimpong & Christopher Gan & Baiding Hu, 2013. "Efficiency And Competition In The Ghanaian Banking Industry: A Panel Granger Causality Approach," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 1-16.
    • Handle: RePEc:wsi:afexxx:v:08:y:2013:i:01:n:s2010495213500048
    DOI: 10.1142/S2010495213500048
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    References listed on IDEAS

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    1. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    2. Michael Koetter & James Kolari, 2008. "Testing the quiet life of U.S. banks with adjusted Lerner indices," Proceedings 1094, Federal Reserve Bank of Chicago.
    3. Altunbas, Y. & Gardener, E. P. M. & Molyneux, P. & Moore, B., 2001. "Efficiency in European banking," European Economic Review, Elsevier, vol. 45(10), pages 1931-1955, December.
    4. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    5. repec:zbw:bofrdp:2011_005 is not listed on IDEAS
    6. Schaeck, Klaus & Čihák, Martin, 2008. "How does competition affect efficiency and soundness in banking? New empirical evidence," Working Paper Series 932, European Central Bank.
    7. Hale Abdul Kader & Mike Adams & Philip Hardwick, 2010. "The Cost Efficiency of Takaful Insurance Companies," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(1), pages 161-181, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Nathaniel Blankson & Godfred Amewu & Kenneth Ofori-Boateng & Kwame Adanu, 2022. "Banking reforms, efficiency and competition: new empirical evidence from a panel vector autoregressive analysis of Ghanaian banks," SN Business & Economics, Springer, vol. 2(5), pages 1-24, May.
    2. Le Ngoc Thuy Trang & Do Thi Thanh Nhan & Nguyen Thi Nhu Hao & Wing-Keung Wong, 2021. "Does Bank Liquidity Risk Lead To Bank'S Operational Efficiency? A Study In Vietnam," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(4), pages 46-88, December.
    3. David Adeabah & Charles Andoh, 2020. "Cost efficiency and welfare performance of banks: evidence from an emerging economy," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 16(5), pages 549-574, July.
    4. Segun Thompson Bolarinwa & Olufemi Bodunde Obembe, 2019. "Firm Size–Profitability Nexus: An Empirical Evidence from Nigerian Listed Financial Firms," Global Business Review, International Management Institute, vol. 20(5), pages 1109-1121, October.
    5. Jayakumar, Manju & Pradhan, Rudra P. & Dash, Saurav & Maradana, Rana P. & Gaurav, Kunal, 2018. "Banking competition, banking stability, and economic growth: Are feedback effects at work?," Journal of Economics and Business, Elsevier, vol. 96(C), pages 15-41.

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    More about this item

    Keywords

    Efficiency; competition; system generalized method of moments; causality; data envelopment analysis; Lerner index; E44; E50; G21;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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