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Privatizations versus Regulation: The Case of West African Banks


  • Jean Paul Azam

    (Toulouse University)

  • Magueye Dia

    (Toulouse University)


This paper builds on the case of West African banks to propose an analysis of the issues raised by government interference, privatization to foreign investors and regulation in developing countries. In the late 80s, there was a severe crisis in the West African banking system, partly due to government interference. The restructuring of the banking system entailed privatization and foreign share ownership. During the 90s, both foreign ownership and the proportion of bad loans went down. We offer an interpretation of these stylized facts within the framework of a simple model where non benevolent governments are prone to political interference, as long as it does not generate too large expected social costs, and learn to refrain from interference after severe crises. Privatization to foreign investors seeking high return and high risk does not always ensure efficiency of the banking system, while regulation by independent agencies can be more effective. Further confrontation of the theory to the data is provided by panel regressions on profits, bad loans and ownership, ran across the seven countries of the West African Economic and Monetary Union from 1990 to 1997.

Suggested Citation

  • Jean Paul Azam & Magueye Dia, 2000. "Privatizations versus Regulation: The Case of West African Banks," Econometric Society World Congress 2000 Contributed Papers 1679, Econometric Society.
  • Handle: RePEc:ecm:wc2000:1679

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    1. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 483-512.
    2. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
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