Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/227958 
Year of Publication: 
2019
Series/Report no.: 
AGDI Working Paper No. WP/19/080
Publisher: 
African Governance and Development Institute (AGDI), Yaoundé
Abstract: 
Purpose- In this study, we test the so-called 'Quiet Life Hypothesis' (QLH) which postulates that banks with market power are less efficient. Design/methodology/approach- We employ instrumental variable Ordinary Least Squares, Fixed Effects, Tobit and Logistic regressions. The empirical evidence is based on a panel of 162 banks consisting of 42 African countries for the period 2001-2011. There is a two-step analytical procedure. First, we estimate Lerner indices and cost efficiency scores. Then, we regress cost efficiency scores on Lerner indices contingent on bank characteristics, market features and the unobserved heterogeneity. Findings- The empirical evidence does not support the QLH because market power is positively associated with cost efficiency. Originality/value- Owing to data availability constraints, this is one of the few studies to test the QLH in African banking.
Subjects: 
Finance
Savings banks
Competition
Efficiency
Quiet life hypothesis
JEL: 
E42
E52
E58
G21
G28
Document Type: 
Working Paper

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