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Information asymmetry and conditional financial sector development

Simplice Asongu (African Governance and Development Institute, Yaoundé, Cameroon, and Department of Economics, University of South Africa, Pretoria, South Africa)
Jacinta Nwachukwu (School of Economics Finance and Accounting, Coventry University, Coventry, UK)

Journal of Financial Economic Policy

ISSN: 1757-6385

Article publication date: 6 November 2017




The purpose of this study is to examine the role of reducing information asymmetry (IA) on conditional financial sector development in 53 African countries for the period 2004-2011.


The empirical evidence is based on contemporary and non-contemporary quantile regressions. Instruments for reducing IA include public credit registries (PCRs) and private credit bureaus (PCBs). Hitherto unexplored dimensions of financial sector development are used, namely, financial sector dynamics of formalization, informalization, semi-formalization and non-formalization.


The following findings are established. First, the positive (negative) effect of information sharing offices (ISO) on formal (informal) financial development is consistent with theory. Second, ISOs consistently increase formal financial development, with the incidence of PCRs higher in terms of magnitude, and financial sector formalization, with the impact of PCBs higher for the most part. Third, only PCBs significantly decrease informal financial development and both ISOs decrease financial sector informalization. Policy implications are discussed.


The study assesses the effect of reducing IA on financial development when existing levels of it matter because current studies based on mean values of financial development provide blanket policy implications which are unlikely to be effective unless they are contingent on prevailing levels of financial development and tailored differently across countries with high, intermediate and low initial levels of financial development.



An earlier working version of this article is available at The authors are indebted to the editor and reviewers for constructive comments.


Asongu, S. and Nwachukwu, J. (2017), "Information asymmetry and conditional financial sector development", Journal of Financial Economic Policy, Vol. 9 No. 4, pp. 372-392.



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Copyright © 2017, Emerald Publishing Limited

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