Spillover and Competition Effects: Evidence from the sub-Saharan African Banking Sector
This paper examines the efficiency effects of foreign bank entry on domestic banks in sub- Saharan Africa during the period 1999–2006. Using a recently compiled dataset on foreign bank presence, the competition and spillover effects of North–South, regional and nonregional South–South banks are distinguished. The results show that the competitive pressure on domestic banks' net interest margins emanates only from regional South–South banks. There is evidence of spillover effects from North-South and regional South-South banks on domestic banks. As domestic banks invest in foreign technologies, their overhead costs increase in the short-run. Non-regional South-South banks seem to have little effect on the efficiency of domestic banks.
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