Time: 13:00-15:00 (UK Time), Wednesday, 31 January 2024
Presenter: Dr. Jeffrey Ighedosa , SOAS University of London
Discussants: Dr. Martin Brownbridge, Independent Consultant & Mr Gabriel Davel, International Consultant, Davel & Associates, South Africa
Chair: Prof. Victor Murinde, SOAS University of London
Online venue: Click here to join the seminar on Microsoft Teams (For any inquiry about how to join the online seminar, please contact Dr. Meng Xie at xm1@soas.ac.uk)
Abstract
A growing literature has shown that the adoption of bank credit information sharing schemes can improve the accuracy of credit information used by banks and bank regulators and thereby enhance the quality of loan assets. However, what is not altogether clear is how credit information sharing affects bank diversification strategies and excess value. In this paper, we seek to address the unresolved issue; we specify a threshold model to create two regimes of bank diversification, examine how information sharing schemes affect lending and non-lending activities of banks in both regimes, and quantify the effects of these relationships on the excess value of banks. We estimate the model using a panel dataset of 368 banks from 40 developing countries for the period 2012-2020. We uncover three main findings. First, there is an inverted U-curve relationship between bank diversification and excess value. Second, mandatory information sharing schemes reduce excess value of banks by increasing diversification above the optimal level, thereby generating a diversification discount. Third, voluntary information sharing schemes increase bank excess value by preventing diversification above the optimal level, thereby yielding a diversification premium. These findings have important implications for bank managers as well as banking sector regulators.
Keywords: Bank diversification, bank excess value, voluntary information sharing, mandatory information sharing
Presenter
Dr. Jeffrey Ighedosa is a Senior Teaching Fellow in Financial Accounting at the School of Finance and Management, SOAS University of London. He recently completed his PhD in Finance at SOAS University of London. Also, he holds an MBA in Banking and Finance from the University of Wales Trinity Saint David, a BSc in Accounting and Finance from Oxford Brookes University, and has fulfilled all examinations requirements for the award of ACCA qualification (pending). His research interests include credit information sharing and bank behaviour, sustainable financial reporting, and competing financing models for SMEs in developing countries.