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1 – 10 of over 26000Takashi Matsuki, Kimiko Sugimoto and Yushi Yoshida
We examine how the degree of regional financial integration in African stock markets has evolved over the last eleven years. Despite increasing regional economic cooperation, the…
Abstract
We examine how the degree of regional financial integration in African stock markets has evolved over the last eleven years. Despite increasing regional economic cooperation, the process of stock market integration has been slow. To facilitate growth via developed financial markets but keep financial stability risk at a minimum, further regional integration should be promoted, and mild capital controls on non-African investors may be necessary. A Diebold-Yilmaz spillover analysis is applied to ten African stock markets for the period between August 2004 and January 2015. We examine spillovers among four regions and among individual countries. Regional integration, as measured by total spillovers in Africa, is increasing but remains very low. These spillovers were temporarily heightened during the global financial crisis. Cross-regional spillovers are high between Northern and Southern Africa. Asymmetric capital controls on African and non-African investors must be considered to foster further regional integration and to mitigate financial stability risk. This is one of the few studies to address the construction of the future architecture of regionally integrated stock markets in emerging countries.
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The development of banking in Africa followed the demand of exchange networks from traditional indigenous economies to colonial exchange with the European world. The establishment…
Abstract
The development of banking in Africa followed the demand of exchange networks from traditional indigenous economies to colonial exchange with the European world. The establishment of European banking institutions reflected the needs of the capitalist economy introduced by colonialism. The banking management of late nineteenth century and early twentieth century European banks adhered to the interests of shareholders. This chapter shows the emergence of well-managed banks in Africa, but after decolonization the political economy of African independence resulted in state capturing of financial institutions in most African countries. The South African banking system developed in close adherence to the British model. State-owned post-independence banks in Africa failed to deliver the development envisaged. The chapter shows the adverse impact of global economic developments on Africa, resulting in high debt levels. Structural adjustment of African economies and new market-oriented policies allowed the development of locally owned private banking institutions. The high-cost structure of the formal banking system from the dominant South African banks incentivised the mobile money innovation, an arena where African entrepreneurs lead global markets. Financial inclusion remains low in Africa.
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– Assessment of African financial development dynamic convergences in money, credit, efficiency and size. The paper aims to discuss these issues.
Abstract
Purpose
Assessment of African financial development dynamic convergences in money, credit, efficiency and size. The paper aims to discuss these issues.
Design/methodology/approach
The empirical evidence is premised on 11 homogenous panels based on regions (Sub-Saharan and North Africa), income-levels (low, middle, lower-middle and upper-middle), legal-origins (English common-law and French civil-law) and religious dominations (Christianity and Islam). The paper examines convergence in financial intermediary dynamics of depth, efficiency, activity and size.
Findings
Findings suggest that countries with small-sized financial intermediary depth, efficiency, activity and size are catching-up countries with large-sized financial intermediary depth, efficiency, activity and size, respectively. The paper also provide the speeds of convergence and time necessary to achieve a full (100 percent) convergence.
Practical implications
The presence of strong links among African banking sectors may present little opportunity for portfolio diversification. The convergence patterns show positive steps toward regional integration. As a policy implication, African governments should not relent in structural and institutional reforms.
Originality/value
It is the first critical assessment of convergence in financial intermediary development dynamics in the African continent.
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Olusegun Felix Ayadi and Johnnie Williams
This study aims to explore the possibility that securities markets in selected African countries of Egypt, Kenya, Nigeria and South Africa play a significant role in capital…
Abstract
Purpose
This study aims to explore the possibility that securities markets in selected African countries of Egypt, Kenya, Nigeria and South Africa play a significant role in capital accumulation using panel data analysis. This is done by exploring the relationship between gross fixed capital formation on the one hand and financial market development indicators on the other hand. Thus, the study aims to examine if stock market size and liquidity are determinants of capital accumulation.
Design/methodology/approach
The analysis is based on annual times series from 1991 through 2017 spanning four African stock markets. The analysis utilizes the fixed-effect and random-effect econometric models. The Durbin–Wu–Hausman test is used to choose between the two models.
Findings
The key results indicate that stock market capitalization is a positive determinant of gross fixed capital formation. The market value traded and turnover have no relationship with capital formation. Therefore, the role of stock African stock markets in promoting capital accumulation and, subsequently, industrial growth in Africa is seriously questioned.
Originality/value
Only a handful of studies have examined the role of the African securities market in promoting capital accumulation. This study is unique in which it focuses on the leading stock markets in the four corners of Africa. The markets are from Egypt in the north, South Africa from the south, Nigeria from the west and Kenya from the east. These four markets account for a significant segment of all African markets.
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Ebere Kalu, Chinwe Okoyeuzu, Angela Ukemenam and Augustine Ujunwa
We study the contemporaneous effects of US monetary policy normalization on African stock market using panel data from six African countries.
Abstract
Purpose
We study the contemporaneous effects of US monetary policy normalization on African stock market using panel data from six African countries.
Design/methodology/approach
Daily data from May 1, 2013 to December 31, 2018 were used in order to accommodate the announcement effects since the US monetary policy normalization announcement was made in May 2013, while the rate hike was in December 2015. The study used the FE, RE and PMG models.
Findings
The results revealed that US 10-year bond yield and Treasury bill rate shocks negatively affect stock prices in Africa. S$P500 shock positively affects African stock prices.The result revealed that the integration of African financial market to the global financial market is a major source of vulnerability. The finding that US Treasury bill rate is a major depressant of the African stock prices reveals the short-termism of foreign polio inflows into African economies.
Originality/value
We provide inexorably insight into the interplay of financial systems globally. It can be useful for the purposes of generalization in developing economies in the shape of African countries. More so, this study could be replicated in another economic bloc or region with the aim of further exposing the far-reaching spillover effects of the US monetary policy normalization.
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Ebere Ume Kalu, Augustine Chuck Arize, Sylvester Okechukwu Ilo, Ifeoma Ihegboro and Chiamaka Goodness Eze
This study investigated the interactive impact of global and domestic stock market variables on the depth of the financial system in Sub-Saharan African (SSA) countries from 1990…
Abstract
Purpose
This study investigated the interactive impact of global and domestic stock market variables on the depth of the financial system in Sub-Saharan African (SSA) countries from 1990 to 2018.
Design/methodology/approach
The study used the mean group and pooled mean group estimators for the dynamic heterogeneous panel.
Findings
The results provide strong statistical evidence that the depth of the financial system in SSA countries is influenced by a combination of local and international stock market indicators. While the local variables exert a positive influence, the global indicator tends to negatively affect the depth of the system, particularly the monetization ratio.
Practical implications
While the tendency of portfolio adjustments and reversal can be inferred, the study stresses the need for a more globalized approach to financial policy formulation and implementation even as the trend of global financializaton gets more robust and more profound.
Originality/value
This study is unique in that, unlike prior ones, it has extended the debate on the role of the stock market in financial deepening from a domestic to an international dimension. Financial policy making can be aided by the authors' findings through looking at the financial deepening-stock market linkage from both domestic and globalized perspectives.
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Kimberly M. Ellis and Phyllis Y. Keys
To explain for doctoral students and new faculty, the appropriate techniques for using event study methods while identifying problems that make the method difficult for use in the…
Abstract
Purpose
To explain for doctoral students and new faculty, the appropriate techniques for using event study methods while identifying problems that make the method difficult for use in the context of African markets.
Methodology/approach
We review the finance and strategy literature on event studies, provide an illustrative example of the technique, summarize the prior use of the method in research using African samples, and indicate remedies for problems encountered when using the technique in African markets.
Findings
We find limited use of the technique in African markets due to limited data availability which is attributable to problems of infrequent trading, thin markets, and inadequate access to free data.
Research limitations
Our review of the literature on event studies using African data is limited to English-language journals and sources accessible through our library research databases.
Practical implications
More often, researchers will need to use nonparametric techniques to evaluate market responses for companies in or events affecting the African markets.
Originality/value of the chapter
We make a contribution with this chapter by giving a more detailed description of event study methods and by identifying solutions to problems in using the technique in African markets.
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Ismail Fasanya and Oluwatomisin Oyewole
As financial markets for environmentally friendly investment grow in both scope and size, analyzing the relationship between green financial markets and African stocks becomes an…
Abstract
Purpose
As financial markets for environmentally friendly investment grow in both scope and size, analyzing the relationship between green financial markets and African stocks becomes an important issue. Therefore, this paper examines the role of infectious disease-based uncertainty on the dynamic spillovers between African stock markets and clean energy stocks.
Design/methodology/approach
The authors employ the dynamic spillover in time and frequency domains and the nonparametric causality-in-quantiles approach over the period of November 30, 2010, to August 18, 2021.
Findings
These findings are discernible in this study's analysis. First, the authors find evidence of strong connectedness between the African stock markets and the clean energy market, and long-lived but weak in the short and medium investment horizons. Second, the BDS test shows that nonlinearity is crucial when examining the role of infectious disease-based equity market volatility in affecting the interactions between clean energy stocks and African stock markets. Third, the causal analysis provides evidence in support of a nonlinear causal relationship between uncertainties due to infectious diseases and the connection between both markets, mostly at lower and median quantiles.
Originality/value
Considering the global and recent use of clean energy equities and the stock markets for hedging and speculative purposes, one may argue that rising uncertainties may significantly influence risk transmissions across these markets. This study, therefore, is the first to examine the role of pandemic uncertainty on the connection between clean stocks and the African stock markets.
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Misheck Mutize and Sean Joss Gossel
The purpose of this paper is to examine whether new sovereign credit rating (SCR) changes are valuable, and relevant information is provided to bond and equity markets in 30…
Abstract
Purpose
The purpose of this paper is to examine whether new sovereign credit rating (SCR) changes are valuable, and relevant information is provided to bond and equity markets in 30 African countries that received an SCR during the period 1994–2014.
Design/methodology/approach
This study applies a combination of GARCH models and event study techniques.
Findings
This study shows that the financial markets do not significantly react to SCR announcements, possibly because these African markets are already perceived to be risky.
Research limitations/implications
At last, a significant portion of Africa’s sovereign debt is held by foreign investors (Arslanalp and Tsuda, 2014) who commonly preclude asset managers from investing in low SCR grades. Thus, an unfavorable SCR announcement could lead to a withdrawal of these funds, which could significantly alter both fiscal and monetary policies in the economy.
Practical implications
SCRs is immaterial to investors holding African securities.
Social implications
Although financial markets are weakly responsive to SCR announcements, they appear to be informationally important in the operation of stocks and bond markets in Africa. Therefore, governments should appreciate the long-term information exchange between investors and borrowers, and the consequential nature of credit ratings in Africa’s nascent financial markets in order to proactively manage the risks of negative ratings.
Originality/value
Studies on credit rating effects on Africa markets are rare.
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Dev Kumar Boojihawon and Kelechi K. Acholonu
Research investigating the internationalisation process of firms from Sub‐Saharan Africa (SSA) is limited. The purpose of this paper is to draw on extant work on…
Abstract
Purpose
Research investigating the internationalisation process of firms from Sub‐Saharan Africa (SSA) is limited. The purpose of this paper is to draw on extant work on internationalisation theory to propose an integrative framework that investigates the internationalisation process of African banks.
Design/methodology/approach
Using a qualitative, case‐based approach, the study explores the distinct cases of four banks (three in Nigeria and one in Kenya/Mauritius) and explores their internationalisation behaviour and pathways to understand how they have leveraged their ability to internationalise their businesses.
Findings
The findings illustrate how the internationalisation pathways of African banks are shaped by a balancing act of leveraging accumulated global and regional strengths to achieve international growth and expansion.
Research limitations/implications
The study acknowledges that it draws from a limited empirical base on a very important topic and in so doing it provides directions for further research towards understanding the internationalisation process of firms in Sub‐Saharan Africa (SSA) and highlights some policy implications.
Originality/value
The paper adopts a process perspective to explore and understand the internationalisation of African banks. Africa‐specific studies of internationalisation are very limited, and this study provides a critical extension of the Western‐based internationalisation theory to the African context.
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