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Financial sector transparency, financial crises and market power: A cross‐country evidence
Author(s) -
Kusi Baah,
Agbloyor Elikplimi,
GyekeDako Agyapomaa,
Asongu Simplice
Publication year - 2022
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.2380
Subject(s) - transparency (behavior) , financial system , business , dominance (genetics) , financial market , private sector , financial crisis , market power , finance , economics , public sector , market economy , economy , macroeconomics , economic growth , biochemistry , chemistry , political science , law , gene , monopoly
The study investigates how financial sector transparency moderates the influence of financial crises on bank market power across 75 economies between 2004 and 2014. Using two‐step dynamic system generalized method of moments the study shows that while public sector‐led financial sector transparency reduces bank market power, private sector‐led financial sector transparency promotes bank market power given that private sector‐led transparency gives financial cost advantage to financially sound banks to solidify the market power and dominance. Similarly, while financial crises reduce the market power of banks implying that during financial crises banks lose their market power, financial sector transparency promotes the negative effect of financial crises on bank market power. This implies that during financial crises, financial sector transparency whether enforced through private or public sector, boosts the weakening effect of financial crises on bank market power. These findings imply that regulators can rely on financial transparency to tame bank market power to enhance banking competitiveness. The findings and results are consistent even when country, time and continental effects are controlled for.