Banking Competition and Industrialization: Evidence from Some African Countries
South Asian Journal of Social Studies and Economics,
Page 1-16
DOI:
10.9734/sajsse/2023/v17i2631
Abstract
The relationship between bank competition and industrialization remains controversial and scarce in studies related to African countries. Using a sample of 26 African countries from 1996 to 2017, the objective of this paper is to analyze the effect of banking competition measured by non-structural measures (Lerner index and Boone indicator) on industrialization. Using the GMM, we obtained two different results. When measured by the Lerner index, competition evolves in the same direction as industrialization while the opposite effect is observed when using the Boone index. Following these results, we found that the relationship between bank competition and industrialization is non-linear. Bank competition should be encouraged but it should also be regulated so as not to become a brake on industrialization.
Keywords:
- Banking competition
- industrialization
- lerner index
- boone indicator
- African countries
How to Cite
Raisa, T. T., & Barnabé, A. Y. (2023). Banking Competition and Industrialization: Evidence from Some African Countries. South Asian Journal of Social Studies and Economics, 17(2), 1-16. https://doi.org/10.9734/sajsse/2023/v17i2631
References
AfDB. Annual Report; 2019.
Morris M, Fessehaie J. The industrialization challenge for Africa: Towards a commodities based industriali-zetion path. Journal of African Trade. 2014;1:25-36.
Agon A VL. Industrialisation à petite échelle (IPE) : Une nouvelle approche de développement territorial pour les pays africains ? le cas des entreprises de l’ananas dans la région d’Allada au Sud du Bénin. Université du Québec à Rimouski, services de la bibliothèque. French ; 2017.
Haraguchi N, Martorano B and Sanfilippo M. What factors drive successful industrialization? evidence and implications for developing countries. Structural Change and Economic Dynamics. 2018;49:266–276.
Schumpeter JA. Business cycles: A theoretical, historical and statistical analysis of the capitalist process. McGraw-Hill book company, New-York Toronto London; 1939.
Gerschenkron A. Economic backwardness in historical perspective. Cambridge, Mass.: Belknap Pr. of Harvard Univ. Pr. 1962;9:206.
Cameron R. Banking in the early stages of industrialization: A preliminary survey. Scandinavian Economic History Review. 1963;11:117-134.
Marco Da Rin, et Hellman, T. banks as catalysts for industrialization. Journal of Financial Intermediation. 2002; 366-397
Cetorelli N, Strahan PE. Finance as a barrier to entry: Bank competition and industry structure in local US markets. The Journal of Finance, 2006;61(1):437–461.
Dietsch, M. La place de la concurrence dans l’organisation et le fonctionnement du secteur bancaire cycles de conférences : droit économie et justice dans le secteur bancaire. Professeur à l’Institut d’Etudes Politiques de Strasbourg. French ; 2005.
Pagano, M. Financial Markets and Growth: An Overview. European Economic
Review, 1993;37: 613- 622.
Guzman MG. Bank Structure, Capital Accumulation, And Growth: A Simple
Macroeconomic Model. Economic Theory. 2000;16(2):421-455.
Claessens S, et Laeven L. Financial dependence, banking sector competition, and
economic growth. Journal of the European Economic Association. 2005;3(1):179–207:206, 215, 264.
Peterson MA, et Rajan, R. The effect of credit market competition on lending
relationships. The Quarterly Journal of Economics. 1995;110:407-443.
Cetorelli N, Gambera M. Banking market structure, financial dependence and growth: international evidence from industry data. The Journal of Finance. 2001;56:617-648.
Marquez, R. Competition, Adverse Selection, And Information Dispersion in The Banking Industry. Review of Financial Studies. 2002;15:901-926.
Bonaccorsi di Patti E, Dell’Ariccia, G.Bank competition and firm creation. Journal of Money. Credit, and Banking. 2004;36:225–251.
Blundell R, et Bond S. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics. 1998;87: 11–143.
Khan HH, Ahmad RB, Gee CS, Hernandez Montoya AR. Market structure, financial dependence and industrial growth: Evidence from the banking industry in emerging Asian economie, PloS One. 2016b;11(8).
Berger AN, Hasan I, Klapper LF. Further evidence on the link between finance and growth: An international analysis of community banking and economic performance, Journal of Financial Services Research. 2004;25(2–3):169–202.
Allen F, Gale D. Comparing financial systems. the MIT Press; 2000.
Carbo VS, Rodriguez FF, et Udell G. Bank market power and SME financing
constraints. Review of Finance. 2009;13:309-340.
Beck T, Demirguc-Kunt A, Maksimovic V. Bank competition and access to
finance: International evidence. Journal of Money, Credit and Banking. 2004;36(3): 627–648: 214.
Love I, et Peria MSM. How bank competition affects firms’ access to finance. *The World Bank Economic Review. 2014;29(3).
Liu G, Mirzaei A, Vandoros S. The impact of bank competition and concentration on industrial growth. Economics Letters. 2014;124(1):60–63.
Khan HH, Abdul G, Fiza Q, Ijaz UR. Bank competition, financial development and growth of financially dependent industries: Fresh evidence from China. Global Economic Review; 2018.
Mitchener KJ, Wheelock DC. Does the structure of banking markets affect economic growth? Evidence from US state banking markets. Explorations in Economic History. 2013;50(2):161–178.
Zarutskie, R. Evidence on the effects of bank competition on firm borrowing and investment. Journal of Financial Economics. 2006;81(3):503–537.
Hoxha I. The market structure of the banking sector and financially dependent manufacturing sectors. International Review of Economics & Finance, 2013;27:432–444.
Fungacova Z, Shamshur A, et Weill L. Does bank competition reduce cost of
credit? cross-country evidence from Europe. Journal of Banking and Finance, Elsevier. 2017;83(C):104-120.
Owen AL, et Pereira JM. Bank concentration, competition and financial inclusion. Review of Development Finance. 2018;8(1):1-17.
World development indicators, workbook. The World Bank; 2020.
Boone J. A new way to measure competition. Economic Journal. 2008;118:1245-1261.
Leon F. Measuring competition in banking: A critical review of methods. ffhalshs-
v2ff; 2015
Schaeck K et Cihák M. Competition, efficiency and soundness in banking: an
industrial organization perspective. Discussion Paper 2010-68S, Tilburg
University, Center for Economic Research.
Romer PM. Increasing returns and long-run growth. Journal of Political Economy.
;94(5):1002–1037
Jonathan T, Hans JV. Human capital, equipment investment, and industrialization. European economic review. 1998;42(7):1343-1362
Samouel B, Aram B. The determinants of industrialization: Empirical evidence for Africa. European Scientific Journal. 2016; 12(10):219-238.
Arellano M, Bond S. Some tests of specification for panel data: Monte Carlo
evidence and an application to employment equations. The Review of Economic Studies. 1991;58(2): 277-297
Pesaran MH. General diagnostic tests for cross section dependence in panels; 2004.
Wooldridge J.M. Econometric analysis of cross section and panel data, MIT Press; 2010.
Pesaran MH. A simple panel unit root test in the presence of cross- section dependence. Journal of Applied Econometrics. 2007;22(2): 265–312.
Morris M, Fessehaie J. The industrialization challenge for Africa: Towards a commodities based industriali-zetion path. Journal of African Trade. 2014;1:25-36.
Agon A VL. Industrialisation à petite échelle (IPE) : Une nouvelle approche de développement territorial pour les pays africains ? le cas des entreprises de l’ananas dans la région d’Allada au Sud du Bénin. Université du Québec à Rimouski, services de la bibliothèque. French ; 2017.
Haraguchi N, Martorano B and Sanfilippo M. What factors drive successful industrialization? evidence and implications for developing countries. Structural Change and Economic Dynamics. 2018;49:266–276.
Schumpeter JA. Business cycles: A theoretical, historical and statistical analysis of the capitalist process. McGraw-Hill book company, New-York Toronto London; 1939.
Gerschenkron A. Economic backwardness in historical perspective. Cambridge, Mass.: Belknap Pr. of Harvard Univ. Pr. 1962;9:206.
Cameron R. Banking in the early stages of industrialization: A preliminary survey. Scandinavian Economic History Review. 1963;11:117-134.
Marco Da Rin, et Hellman, T. banks as catalysts for industrialization. Journal of Financial Intermediation. 2002; 366-397
Cetorelli N, Strahan PE. Finance as a barrier to entry: Bank competition and industry structure in local US markets. The Journal of Finance, 2006;61(1):437–461.
Dietsch, M. La place de la concurrence dans l’organisation et le fonctionnement du secteur bancaire cycles de conférences : droit économie et justice dans le secteur bancaire. Professeur à l’Institut d’Etudes Politiques de Strasbourg. French ; 2005.
Pagano, M. Financial Markets and Growth: An Overview. European Economic
Review, 1993;37: 613- 622.
Guzman MG. Bank Structure, Capital Accumulation, And Growth: A Simple
Macroeconomic Model. Economic Theory. 2000;16(2):421-455.
Claessens S, et Laeven L. Financial dependence, banking sector competition, and
economic growth. Journal of the European Economic Association. 2005;3(1):179–207:206, 215, 264.
Peterson MA, et Rajan, R. The effect of credit market competition on lending
relationships. The Quarterly Journal of Economics. 1995;110:407-443.
Cetorelli N, Gambera M. Banking market structure, financial dependence and growth: international evidence from industry data. The Journal of Finance. 2001;56:617-648.
Marquez, R. Competition, Adverse Selection, And Information Dispersion in The Banking Industry. Review of Financial Studies. 2002;15:901-926.
Bonaccorsi di Patti E, Dell’Ariccia, G.Bank competition and firm creation. Journal of Money. Credit, and Banking. 2004;36:225–251.
Blundell R, et Bond S. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics. 1998;87: 11–143.
Khan HH, Ahmad RB, Gee CS, Hernandez Montoya AR. Market structure, financial dependence and industrial growth: Evidence from the banking industry in emerging Asian economie, PloS One. 2016b;11(8).
Berger AN, Hasan I, Klapper LF. Further evidence on the link between finance and growth: An international analysis of community banking and economic performance, Journal of Financial Services Research. 2004;25(2–3):169–202.
Allen F, Gale D. Comparing financial systems. the MIT Press; 2000.
Carbo VS, Rodriguez FF, et Udell G. Bank market power and SME financing
constraints. Review of Finance. 2009;13:309-340.
Beck T, Demirguc-Kunt A, Maksimovic V. Bank competition and access to
finance: International evidence. Journal of Money, Credit and Banking. 2004;36(3): 627–648: 214.
Love I, et Peria MSM. How bank competition affects firms’ access to finance. *The World Bank Economic Review. 2014;29(3).
Liu G, Mirzaei A, Vandoros S. The impact of bank competition and concentration on industrial growth. Economics Letters. 2014;124(1):60–63.
Khan HH, Abdul G, Fiza Q, Ijaz UR. Bank competition, financial development and growth of financially dependent industries: Fresh evidence from China. Global Economic Review; 2018.
Mitchener KJ, Wheelock DC. Does the structure of banking markets affect economic growth? Evidence from US state banking markets. Explorations in Economic History. 2013;50(2):161–178.
Zarutskie, R. Evidence on the effects of bank competition on firm borrowing and investment. Journal of Financial Economics. 2006;81(3):503–537.
Hoxha I. The market structure of the banking sector and financially dependent manufacturing sectors. International Review of Economics & Finance, 2013;27:432–444.
Fungacova Z, Shamshur A, et Weill L. Does bank competition reduce cost of
credit? cross-country evidence from Europe. Journal of Banking and Finance, Elsevier. 2017;83(C):104-120.
Owen AL, et Pereira JM. Bank concentration, competition and financial inclusion. Review of Development Finance. 2018;8(1):1-17.
World development indicators, workbook. The World Bank; 2020.
Boone J. A new way to measure competition. Economic Journal. 2008;118:1245-1261.
Leon F. Measuring competition in banking: A critical review of methods. ffhalshs-
v2ff; 2015
Schaeck K et Cihák M. Competition, efficiency and soundness in banking: an
industrial organization perspective. Discussion Paper 2010-68S, Tilburg
University, Center for Economic Research.
Romer PM. Increasing returns and long-run growth. Journal of Political Economy.
;94(5):1002–1037
Jonathan T, Hans JV. Human capital, equipment investment, and industrialization. European economic review. 1998;42(7):1343-1362
Samouel B, Aram B. The determinants of industrialization: Empirical evidence for Africa. European Scientific Journal. 2016; 12(10):219-238.
Arellano M, Bond S. Some tests of specification for panel data: Monte Carlo
evidence and an application to employment equations. The Review of Economic Studies. 1991;58(2): 277-297
Pesaran MH. General diagnostic tests for cross section dependence in panels; 2004.
Wooldridge J.M. Econometric analysis of cross section and panel data, MIT Press; 2010.
Pesaran MH. A simple panel unit root test in the presence of cross- section dependence. Journal of Applied Econometrics. 2007;22(2): 265–312.
-
Abstract View: 39 times
PDF Download: 20 times
