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Testing The Quiet Life Hypothesis in the African Banking Industry

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  • Simplice A. Asongu, Phd

    ()

  • Nicholas M. Odhiambo

    () (Department of Economics, University of South Africa)

Abstract

The Quiet Life Hypothesis (QLH) is the pursuit of less efficiency by firms. In this study, we assess if powerful banks in the African banking industry are increasing financial access. The QLH is therefore consistent with the pursuit of financial intermediation inefficiency by large banks. To investigate the hypothesis, we first estimate the Lerner index. Then, using Two Stage Least Squares, we assess the effect of the Lerner index on financial access proxied by loan price and loan quantity. The empirical evidence is based on a panel of 162 banks from 42 countries for the period 2001-2011. The findings support the QLH, although quiet life is driven by the below-median Lerner index sub- sample. Policy implications are discussed.

Suggested Citation

  • Simplice A. Asongu, Phd & Nicholas M. Odhiambo, 2018. "Testing The Quiet Life Hypothesis in the African Banking Industry," Working Papers 1 3003, Office Of The Chief Economist, Development Bank of Nigeria.
  • Handle: RePEc:dbn:wps208:3003
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    Cited by:

    1. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "Size, efficiency, market power, and economies of scale in the African banking sector," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-22, December.
    2. Simplice A. Asongu, Phd & Joseph Nnanna D.B.A, . "Ict In Reducing Information Asymmmetry For Financial Sector Competition," Journal of Economic and Sustainable Growth 1, Office Of The Chief Economist, Development Bank of Nigeria.

    More about this item

    Keywords

    Financial Access; Bank performance; Africa.;

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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