We examine policy thresholds of information sharing for financial development in 53 African countries for the period 2004–2011. Public credit registries (PCRs) and private credit bureaus (PCBs) are used as proxies for reducing information asymmetry whereas financial development includes all financial dimensions identified by the financial development and structure database (FDSD) of the World Bank, namely: depth, efficiency, activity and size. The empirical evidence is based on interactive generalised methods of moments with forward orthogonal deviations. The following findings are established. First, PCRs and PCBs have negative effects on financial depth, with the magnitude of the former higher. Second, contrary to PCRs which have insignificant effects, PCBs have a negative impact on banking system efficiency. Third, PCRs and PCBs have negative impacts on financial activity, with the magnitude of the latter higher. Moreover, both of their marginal effects are negative. Fourth, PCRs and PCBs have positive effects on financial size, with the effect of the former higher. While marginal effects are positive, corresponding thresholds are not within range. Policy implications are discussed.
Bibliographical noteOpen Access funded by Africagrowth Institute
Under a Creative Commons license
- Information asymmetry
- Financial development