Bank Recapitalization and Market Concentration in Ghana’s Banking Industry: A Herfindahl-Hirschman Index Analysis

Global Journal of Business Research, v. 7 (3) pp. 31-45, 2013

16 Pages Posted: 29 Jan 2013

See all articles by Samuel Yaw Akomea

Samuel Yaw Akomea

Kwame Nkrumah University of Science and Technology, Ghana

Michael Adusei

Kwame Nkrumah University of Science and Technology, Ghana

Date Written: 2013

Abstract

Using Concentration Ratio and Herfindahl-Hirschman Index techniques, the paper investigates the concentration levels of the banking industry in Ghana and forecasts the future concentration levels of the industry should consolidations triggered by the new bank recapitalization policy occur in the industry. The study finds that the HHI indices provide evidence for the contention that for the past eight years the banking industry in Ghana has been highly competitive with no signs of concentration. Evidence also exists to underpin the conclusion that any consolidation of four banks or less stimulated by the new bank recapitalization policy will not upset the existing market concentration. However, consolidation of five or more banks will culminate in high concentration which will be inimical to the interest of customers. The paper, therefore, recommends that, all things being equal, policy makers should permit consolidation of four or less banks if that is the only way the banks will meet the new bank recapitalization requirement.

Keywords: Banking, Market Concentration, Herfindahl-Hirschman Index, Ghana

JEL Classification: D40, D41, E02, G21

Suggested Citation

Akomea, Samuel Yaw and Adusei, Michael, Bank Recapitalization and Market Concentration in Ghana’s Banking Industry: A Herfindahl-Hirschman Index Analysis (2013). Global Journal of Business Research, v. 7 (3) pp. 31-45, 2013, Available at SSRN: https://ssrn.com/abstract=2148565

Samuel Yaw Akomea (Contact Author)

Kwame Nkrumah University of Science and Technology, Ghana ( email )

Faculty of Law
Faculty of Law
AK

Michael Adusei

Kwame Nkrumah University of Science and Technology, Ghana ( email )

Faculty of Law
Faculty of Law
Kumasi, AK +233

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