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Competition in the banking industry: Empirical evidence from Ghana

Kofi Adjei-Frimpong, Christopher Gan and Baiding Hu ()

Journal of Banking Regulation, 2016, vol. 17, issue 3, 159-175

Abstract: Ghana’s banking industry has undergone considerable transformation since 1988 as a result of the gradual but steady implementation of financial service reforms. The main purpose of implementing the financial reforms is to build a competitive and stable banking industry to enhance banks’ efficiency and ultimately economic growth and development. Using annual (panel) data spanning from 2001 to 2010, this study investigates the degree of bank competition and their determinants in Ghana’s banking indusrty using the fixed-effect model and two-step system GMM estimations. The results suggest that Ghana’s banking industry is competitively weak. The findings also indicate that market power persistently exists in Ghana’s banking industry. Furthermore, bank capitalization reduces bank market power and therefore increases bank competition in Ghana. However, there is no indication that bank size, fee income, loan loss provision ratio and rate of inflation have influence on bank competition in Ghana.

Date: 2016
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