The effects of market power on stability: do diversification and earnings strategy matter?
by Mohammed Amidu; William Coffie; Aisha Mohammed Sissy
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 9, No. 4, 2019

Abstract: This paper examines whether the effect of the level of market power on bank soundness depends on the banks' decision to diversify and adopt a particular earnings strategy. We conduct the empirical approach in two stages. First, we estimate the Boone indicator, which is the measure for bank market power. We then regress this measure and other explanatory variables on the bank risk focusing on the role of earnings and diversification strategies. The results show that competition increases earnings management as the level of market power increases when banks diversify into non-interest income generating activities. The results also suggest that the relatively low insolvency risk among banks in Africa is attributed to the high degree of market power and the diversification strategy employed over the period.

Online publication date: Mon, 14-Oct-2019

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the Afro-Asian J. of Finance and Accounting (AAJFA):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com