Title: The structure and behaviour of small African banks: market power and bank diversification strategy in Ghana
Authors: Mohammed Amidu; Charles Adjasi
Addresses: Department of Accounting, University of Ghana Business School, P.O. Box LG 78, Legon, Accra, Ghana ' University of Stellenbosch Business School, P.O. Box 610, Carl Cronje Dr, Bellville, 7535, Cape Town, South Africa
Abstract: This paper analyses the effect of market structure on diversification strategies of the banking industry of Ghana - a growing medium-sized Sub Saharan African country. We draw on a comprehensive panel dataset of 21 Ghanaian banks over a ten-year period. Based on HHI measures of diversification, there is evidence of a gradual shift away from concentration in interest income streams to non-interest income generating activities. The trend in the Lerner index of market power shows that there is very little competition amongst Ghanaian banks. We employ standard panel data econometrics to test if market power influences bank diversification and find that diversification within non-interest income activities increase as banks gain market power.
Keywords: market power; bank diversification; Ghana; Sub Saharan Africa; emerging markets; banking sector; institutional development.
International Journal of Comparative Management, 2018 Vol.1 No.2, pp.202 - 219
Received: 22 Jul 2017
Accepted: 15 Oct 2017
Published online: 24 Jul 2018 *