Ethnic Fractionalization, Governance and Loan Defaults in Africa

Svetlana Andrianova; Badi H. Baltagi; Panicos Demetriades; David Fielding

doi:10.1111/obes.12152

Ethnic Fractionalization, Governance and Loan Defaults in Africa

Svetlana Andrianova, Badi H. Baltagi, Panicos Demetriades, David Fielding

Department of Economics

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

We present a theoretical model of an imperfectly competitive loans market that is suitable for emerging economies in Africa. The model allows for variation in both the level of contract enforcement (the quality of governance) and the degree of market segmentation (the level of ethnic fractionalization). The model predicts a specific form of nonlinearity in the effects of these variables on loan default. Empirical analysis using African panel data for 110 individual banks in 28 countries over 2000–08 provides strong evidence for these predictions. Our results have important implications for the conditions under which policy reform will enhance financial development.

Original language	English (US)
Pages (from-to)	435-462
Number of pages	28
Journal	Oxford Bulletin of Economics and Statistics
Volume	79
Issue number	4
DOIs	https://doi.org/10.1111/obes.12152
State	Published - Aug 2017

ASJC Scopus subject areas

Statistics and Probability
Social Sciences (miscellaneous)
Economics and Econometrics
Statistics, Probability and Uncertainty

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10.1111/obes.12152

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abstract = "We present a theoretical model of an imperfectly competitive loans market that is suitable for emerging economies in Africa. The model allows for variation in both the level of contract enforcement (the quality of governance) and the degree of market segmentation (the level of ethnic fractionalization). The model predicts a specific form of nonlinearity in the effects of these variables on loan default. Empirical analysis using African panel data for 110 individual banks in 28 countries over 2000–08 provides strong evidence for these predictions. Our results have important implications for the conditions under which policy reform will enhance financial development.",

author = "Svetlana Andrianova and Baltagi, {Badi H.} and Panicos Demetriades and David Fielding",

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AU - Demetriades, Panicos

AU - Fielding, David

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Y1 - 2017/8

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AB - We present a theoretical model of an imperfectly competitive loans market that is suitable for emerging economies in Africa. The model allows for variation in both the level of contract enforcement (the quality of governance) and the degree of market segmentation (the level of ethnic fractionalization). The model predicts a specific form of nonlinearity in the effects of these variables on loan default. Empirical analysis using African panel data for 110 individual banks in 28 countries over 2000–08 provides strong evidence for these predictions. Our results have important implications for the conditions under which policy reform will enhance financial development.

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Ethnic Fractionalization, Governance and Loan Defaults in Africa

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