Deregulation, efficiency and competition in developing banking markets: Do reforms really work? A case study for Ghana
Year: 2019
Type: article
Abstract: A key research question that remains largely unanswered especially in the African context is whether the macroeconomic environment and the level of financial development of a country determine the effectiveness of financial reforms. This has important policy implications. We choose Ghana as a case study and carry out an in-depth analysis of its comprehensive set of financial reforms, implemented in the 2000s, which we look at individually. We estimate a stochastic cost frontier to look at efficiency. This is then followed by two different models of competition on the loans market, the main target of the reforms. We find that only the removal of entry restrictions is significant at improving banks efficiency and that private and global foreign, but not regional banks, benefit from it. The results show, however, no improvements in competition, and reveal instead that macroeconomic and institutional weaknesses continue to exert a negative counterbalancing effect. Reforms need to be anchored on stronger macroeconomic fundamentals, institutional initiatives and generally stronger credit environments for their full potential to be revealed in the context of developing financial markets.
Source: Journal of Banking Regulation
Authors: John K. Dadzie, Alessandra Ferrari
Institution: Loughborough University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $2,690
OpenAlex ID: W2923311477