Search results

This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through credit to private sector.

The study sampled 37 selected African economies for the years 1991–2018, and it applied a pooled mean group (PMG) estimator to account for short-run and long-run causal effects, and confirmed short-run adjustments towards the long-run convergences between the variables. Specific suitable tests were also applied.

Evidence confirms positive impacts of both capital formation and final consumption expenditures on financial development in the short run and long run. The moderation of population structures on expenditure structures help to speed up convergences.

This work attests its innovation by accounting for the separate effects of the expenditure types, the moderation effects of young and mature populations for capital and final consumption expenditure on financial development among selected economies in Africa.

This study aims to evaluate the compliance of online Islamic FOREX products with Islamic jurisprudence principles and determines the degree of similarity or difference between Islamic and conventional FOREX products.

This study involves the collection and analysis of secondary data from online sources (i.e. four Islamic FOREX Web sites selected on the basis that they appeared on two Islamic FOREX Web site lists) It also undertakes content analysis of the rulings of jurisprudence scholars on one of the Web sites.

There is no evidence to suggest that the technical processes underpinning current Islamic FOREX products are any different to those underpinning conventional FOREX products. Also there are major contradiction and ambiguities in the rulings offered by the jurisprudence scholars about the permissibility of the products.

The study relies on the analysis of secondary data. Further research that will involve interviews with banking industry employees in both conventional and Islamic banking sectors would provide a better understanding of: how financial products are created and managed and the role of bank regulations in creating and managing different financial products.

It would seem that Islamic FOREX is simply rebranding of conventional FOREX. The paper calls for a modern-day definition of usury (riba).

The way Islamic FOREX is marketed today to online users as synonymous with gambling, and, although branded as Islamic, the actual technical processes that underpin Islamic FOREX products are the same as conventional FOREX products and therefore not compliant with Islamic principles.

This research explores the marketing of Islamic FOREX products.

The objective of this paper is to study the interactions between economic liberalisation, political liberalisation, and financial development in African countries. More specifically, the paper seeks to establish the impact of economic, political, and institutional openness on financial deepening.

In the empirical part, the paper proposes a two‐step procedure which involves the treatment effect and the new panel studies technique of recently updated data for economic and political reform.

The results show to what extent political liberalisation, economic liberalisation, and the stability of the political system have a statistically significant effect on the financial development of the continent, showing that reform, stability, and democratic rule seem to be favourable for development of the financial sector in the continent.

There are few studies that directly explore the link between political and economic liberalisation on financial development. The difference between this paper and other studies is that first, it is restricted to African countries, those that have been mostly undergoing the two types of reform (political and economics). The second reason is that most of the previous papers always took into consideration the effects of financial development on one of the reforms either political or economic, meanwhile in this paper, the author considers the various aspects of reform: political, economical, and the stability of the environment.

The purpose of this paper was to survey the existing literature on the causal relationship between bank-based financial development and economic growth, highlighting the theoretical and empirical evidence from recent work. Although some previous studies have attempted to conduct a survey of the existing research on the finance-growth nexus, the majority of these studies have failed to distinguish between bank-based and market-based financial developments. To our knowledge, this may be the first study of its kind to survey the existing research on the causal relationship between bank-based financial development and economic growth – in both developed and developing countries.

Overall, our study shows that most of the literature reviewed in this paper either supports bidirectional causality between bank-based financial development and economic growth or reinforces the conventional supply-leading response phenomenon. Notwithstanding this outcome, the study also finds the literature in favour of a demand-following response to be increasing – in both number and substance – especially in recent years.

The paper, therefore, concludes that the causal relationship between financial development and economic growth is not clear-cut and that the notion that financial development automatically leads to economic growth is merely based on prima facie or superficial evidence.

Although some previous studies have attempted to conduct a survey of the existing research on the finance-growth nexus, the majority of these studies have failed to distinguish between bank-based and market-based financial developments. To our knowledge, this may be the first study of its kind to survey the existing research on the causal relationship between bank-based financial development and economic growth – in both developed and developing countries.

The knowledge of the link between interbank financing and business cycle fluctuations is important in assessing the stability and soundness of the banking sector. The purpose of this paper is to investigate the simultaneous relationship between interbank financing and the business cycle with respect to the financial structure of the bank-based and market-based systems in European countries by using bank-level data from 2007 to 2011.

The study employs an innovative instrumenting technique with an instrument of the financial structure to address the simultaneous determination of interbank financing and the business cycle.

The results suggest that banks establish pro-cyclical interbank borrowing by increasing their interbank position during booms and reducing it during downturns. Bank-based system performs better in redistributing the liquidity in the economy than the market-based system when there are imperfectly correlated liquidity shocks across regions during the 2007–2009 financial crisis.

The improvement of banks’ liquidity risk management should be aligned with a specific financial system. The macro-prudential supervisor should require banks in the market-based system to disclose their interbank position on the extent of risk exposure during the liquidity shock period to stabilize the EU banking industry.

This study is the first to provide policy makers with some novel empirical results concerning the linkage among bank liquidity, the macroeconomic condition and financial structure.

Many firms in many countries started to issue stock option schemes to their employees in the 1990s (Murphy, 1999).¹ In the course of time, the mushrooming of schemes has generated a heated public debate on the pros and cons of this compensation method. In one camp are those who argue that stock options are nothing more but a compensation mechanism by which managers transfer excessive fortunes to themselves without a real enhancement in firm performance. On the other hand, proponents underline that options provide managers and employees financial incentives to make better decisions, work harder, and share valuable information in a way that enhance firm performance. Thus, they see options – more or less– as a major innovation in managerial and personnel compensation (or more generally in human resource management). However, at the moment there is no theoretical or empirical consensus how stock options and managerial equity ownership affect firm performance in economic literature (Core, Guay, & Larcker, 2003).

This paper empirically examines the impact of financial development on domestic investment in India for the period 1989–2017.

This study employs the autoregressive distributed lag (ARDL) bounds testing approach to co-integration to test the long-run relationship between financial development and domestic investment. To test the direction of causality, Toda–Yamamoto causality test and vector error correction model (VECM) Granger causality/Block Exogeneity Wald test have been employed. Investment has been measured by Gross Capital Formation. To capture various aspects of financial development in India, eight alternative indicators (both bank based and market based) have been used. With the help selected indicators, a composite index (FINDEX) of financial development has been constructed using principal component analysis (PCA).

The estimated result finds evidence in favour of positive, short-run and long-run impact of financial development on investment in the Indian economy. Both bank-based and market-based indicators are found to significantly affect the level of investment. The significant effect of efficiency-based financial development indicators (both bank based and market based) upon domestic investment implies that there is a need to implement policies that ensure the efficiency of financial intermediation.

To the best of authors' knowledge, not much research has been done to explore the relationship between financial development and domestic investment, especially in the case of Indian economy. This study also tries to find the impact of bank-based and market-based financial development indicators upon domestic investment to explore banks vs market issue.

This study aims to analyse the effect of borrower’s countries on syndicated loan spreads, featuring countries according to institutional factors, namely, financial systems and corporate governance systems.

This study is an empirical investigation based on a unique sample of more than 85,000 syndicated loans from 122 countries. The paper uses standard and two-stage least squares regression analysis to test whether the types of financial and corporate governance systems affect loan spreads.

The paper finds that borrowers from countries with financial systems oriented towards the banking-based paradigm pay lower interest rate spreads than those from countries with financial systems oriented towards the market-based paradigm. In addition, there is evidence that borrowers from countries with more developed financial systems pay lower spreads. The results also show that borrowers from countries with an Anglo-Saxon governance system pay higher spreads than borrowers from countries with a Continental governance system.

This study does not consider potential promiscuous relationships that can arise at the ownership structure and governance level between banks and borrowers and may affect loan spreads.

This study suggests that financial and corporate governance systems are essential factors in the financial intermediation process. Furthermore, the evidence indicates that corporates with higher potential agency costs and higher potential information asymmetry are requested to pay higher spreads. Therefore, the opportunities to such corporates invest optimally tend to be scarcer.

The paper highlights the impact of institutional factors on the cost of financing, characterising the countries according to the type of financial system and the type of corporate governance system. The study finds that borrowers from countries with bank-based financial systems pay lower interest rate spreads than those from countries with market-based financial systems. The paper also highlights how the level of financial development affects the cost of financing. The paper focusses on non-financial firms, unlike financial firms, which have been the focus of several empirical studies on topics relating to the cost of funding and corporate governance.

Post-crisis policy measures in Asia have focussed on banking sector and market reform. The paper argues that in order to propel growth, banking and market reform in Asia must be undertaken with the view that they are not mutually exclusive competitive tradeoffs. Rather banks and markets must be viewed as complementary supportive pillars in a financial system. Additionally, legal and functional reform must be undertaken simultaneously. The paper proposes that a likely consequence of doing so will enable creating a four-pillared multi-dimensional growth paradigm in the region to help restore and promote growth.

The purpose of this paper is to investigate the relative impact of bank-based and market-based financial developments on economic growth from 1984 to 2015, using 60countries.

This study uses fixed effect and generalized method of moments (GMM) to investigate the relative impact of bank-based and market-based financial developments on economic growth from 1984 to 2015, using 60 countries. The study further controls regional effects and the Asian crisis, as well as the global economic crisis.

The empirical results of the study revealed that market-based development positively affects economic growth. Besides, market-based financial development indirectly promotes investment, which has the potential to strongly enhance growth. The findings of this study, therefore, provide more support to pro-market-based financial development policies in these regions. Interestingly, bank-based development has no direct impact on development, but indirectly encourages investment, which also promotes growth.

This paper is the first of its kind to empirically examine fixed effect and GMM to investigate the relative impact of bank-based and market-based financial developments on economic growth from 1984 to 2015, using 60 countries.