Capital structure, product and banking market structure and performance
thesisposted on 21.02.2014, 12:27 by Samuel Fosu
This thesis consists of three distinct essays on finance, market structure and performance. Paying particular attention to the degree of industry competition, the first essay investigates the relationship between capital structure and firm performance using panel data consisting of 257 South African firms over the period 1998 to 2009. The essay applies a novel measure of competition, the Boone indicator, to the leverage-performance relationship. The results suggest that financial leverage has a positive and significant effect on firm performance. It is also found that product market competition enhances the performance effect of leverage. The results are robust to alternative measures of competition and leverage. The second essay examines the extent of banking competition in African subregional markets. A dynamic version of the Panzar-Rosse model is adopted beside the static model to assess the overall extent of banking competition in each subregional banking market over the period 2002 to 2009. Consistent with other emerging economies, the results suggest that African banks generally demonstrate monopolistic competitive behaviour. Although the evidence suggests that the static Panzar-Rosse H-statistic is downward biased compared to the dynamic version, the competitive nature identified remains robust to alternative estimators. Paying particular attention to the degree of banking market concentration in developing countries, the third essay examines the effect of credit information sharing on bank lending. Using bank-level data from African countries over the period 2004 to 2009 and a dynamic two-step system generalised method of moments (GMM) estimation, it is found that credit information sharing increases bank lending. The degree of banking market concentration moderates the effect of credit information sharing on bank lending. The results are robust to controlling for possible interactions between credit information sharing and governance.