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The implication of banking competition: Evidence from African countries
Institution:1. College of Business Administration, University of Dubai, Dubai, UAE;2. LAREQUAD, Tunis, Tunisia;3. Department of Statistics, Science Faculty, Yarmouk University, Irbid 21163, Jordan;1. University of Evry, France;2. ESSCA School of Management, France;1. University of Ottawa, Canada;2. Royal Military College of Canada, Canada;3. Carleton University, Canada;1. University of Evry, 2, rue Facteur Cheval, 91025 Evry, France;2. ESSCA – School of Management, Strategy and Management, 55 quai Alphonse Le Gallo, 92513 Boulogne-Billancourt Cedex, France;3. University of Minho, Department of Economics and Economic Policies Research Unit (NIPE), Campus of Gualtar, 4710-057 Braga, Portugal;4. London School of Economics, LSE Alumni Association, Houghton Street, London WC2 2AE, United Kingdom;1. Department of Business and Economics, Ursinus College, 601 East Main Street, Collegeville, PA 19426, United States;2. Department of Economics, Fordham University, 113 West 60th Street, NY, NY 10023, United States;1. Department of Economics, University of Calgary, Calgary, Alberta T2N 1N4, Canada;2. Department of Economics and Finance, University of South Alabama, Mobile, AL 36688, United States
Abstract:This paper examines how bank efficiency and stability are affected by the market power in Africa. Our results show that the higher degree of market power is associated with high level of efficiency and profitability. The banks with more market power operating are able to be in command of the price and hence improve their profit. The market power has a benefit in both stability and risk. Hence, gain in market will increase the stability and reduce the risk for banking system. Our findings do not support the argument that competition should not be based on a “quiet life hypothesis”.
Keywords:Market power  Efficiency  Stability  Africa  Lerner index
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