Banking competition and credit risk in Ghana: exploring the moderating role of credit information sharing regime

Baah Aye Kusi, Emmanuel Senanu Mekpor and Stephen Antwi

Journal of Financial Regulation and Compliance, 2026, vol. 34, issue 5, 847-865

Abstract: PurposeWhile regulators and policymakers are interested in promoting banking competition for economic welfare gains, the franchise value hypothesis argues that increased banking competition leads to increased credit risk exposure. It is against this dilemma that this study relies on the credit information sharing regulation (CISR) and additionally takes advantage of the introduction of credit information sharing in Ghana to test how credit information sharing regulation regime has influenced the increasing effect of banking competition on bank credit risk.Design/methodology/approachThis study uses a battery of estimation techniques of 29 banks covering periods between 2000 and 2020 and additionally controls for year and technological effects.FindingsThe findings show that improved competition worsens credit risk, while CISRR lowers bank credit risk. The joint term of banking competition and CISRR has significant negative effect on credit risk while the net effect computation shows that under CISRR the positive contribution of competition to credit risk is reduced. These results suggest that policymakers in the pursuit of banking competitiveness must do so consciously because it can worsen bank credit risk. Similarly, while these results imply that regulators and bank managers can rely on CISR to tame credit risk directly, CISR can also suppress the positive effect of competition to credit risk.Research limitations/implicationsThis study is focused on and limited to Ghana as an African emerging economy using 29 banks between 2000 and 2020. Hence, the findings are limited to Ghana and other African economies with similar features like Ghana. From a theoretical perspective, the study establishes that the franchise value hypothesis explains the competition-credit risk nexus while noting that credit information sharing as supported by the information sharing theory tames the positive contribution of competition to credit risk exposure of banks in Ghana.Practical implicationsThe results suggest that policymakers in the pursuit of banking competitiveness must do so consciously because it can worsen bank credit risk. Similarly, while these results imply that regulators and bank managers can rely on CISR to tame credit risk directly, CISR can also suppress the positive effect of competition to credit risk. This calls for regulators and policymakers to enact laws that deepen and expand the coverage of CISR to improve the quality and depth of information shared among banks/lenders as doing so can improve the predictive power and screening abilities of banks for credit risk reduction.Originality/valueThis study provides first time evidence on how credit information sharing regulation can lower the positive effect of competition on credit risk in an African emerging economy setup.

Keywords: Information Sharing; Banks; Competition; Credit Risk; Information sharing regulation (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-07-2025-0217

DOI: 10.1108/JFRC-07-2025-0217

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