Information, institutions, and banking sector development in West Africa

Abstract

Using a new West African panel data set, we provide evidence on the determinants of individual banks' loans and assets in some of the poorest countries in the world. Higher loan default rates reduce both the loans to assets ratio and the volume of assets. However, the size of these effects is sensitive to bank age and ownership structure. Younger, private, domestically owned banks are most affected, suggesting that such banks face the most severe informational disadvantages. Very old government-owned banks benefit from high default rates. We also explore how the quality of governance impacts on loans and assets. (JEL G21, O16) © 2011 Western Economic Association International.