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Article
Publication date: 12 October 2015

Nisreen Salti

The purpose of this paper is to examine the redistributive effect of domestic public debt: lenders to the government lie on the higher end of the income distribution, but…

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Abstract

Purpose

The purpose of this paper is to examine the redistributive effect of domestic public debt: lenders to the government lie on the higher end of the income distribution, but the burden of debt financing falls on the entire tax base, to the extent that taxes are used to service debt. Because domestic debt is typically held by domestic lenders, this involves a redistribution of resources.

Design/methodology/approach

The author uses cross-country panel data on debt composition, and run regressions of income inequality, as measured by the Gini coefficient, using various specifications, controlling for a variety of macroeconomic, fiscal and political variables.

Findings

The author finds that the composition of public debt is consistently a significant determinant of income inequality: the domestic share of public debt is regressive and significant across all specifications, even controlling for total and external debt servicing, political conflict, corruption and a variety of government spending variables.

Research limitations/implications

The data span 18 years (1990-2007) which means that long-run effects are hard to track. While the author has a good mix in the sample of observations from low-, middle- and high-income countries, the author is constrained in the choice of countries by the availability of data on inequality and on the composition of public debt.

Originality/value

This is the first paper to examine the composition of public debt in terms of domestic and external debt, and any bearing it may have on income inequality. The finding is also new for both the public debt and income inequality literatures: cross-country panel data are consistent with the belief that domestic debt redistributes resources from the entire tax base to wealthy holders of government debt in a way that external debt does not.

Details

Journal of Economic Studies, vol. 42 no. 5
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 20 July 2022

Daniel Tut

This paper addresses the following questions: Why do some firms employ multiple debt types? What explains debt heterogeneity? Is the choice of the source of debt a…

Abstract

Purpose

This paper addresses the following questions: Why do some firms employ multiple debt types? What explains debt heterogeneity? Is the choice of the source of debt a function of corporate governance?

Design/methodology/approach

The author's paper is empirical and uses multiple regression analysis.

Findings

Firms under weak corporate governance have a higher propensity to use multiple debt types and have a dispersed debt structure. Contrastingly, firms that are well-managed tend to concentrate debt and borrow predominantly from a few creditors. The author also found that while bank debt is negatively associated with debt concentration, market debt is positively associated with debt concentration.

Research limitations/implications

Firms under weak corporate governance have a higher propensity to use multiple debt types and have a dispersed debt structure. Well-managed firms tend to concentrate debt and borrow predominantly from a few creditors. Bank debt is negatively associated with debt concentration and market debt is positively associated with debt concentration.

Practical implications

Policymakers and practitioners need to account not only for changes in the firm’s total debt level but also for changes within the firm’s debt composition. Understanding a manager’s choice of debt structure can incentivize creditors to effectively monitor and use debt concentration as a form of commitment device that transfers some control rights from the manager to creditors.

Originality/value

While a vast body of corporate finance literature examines the conflict between shareholders and management, there is little empirical work on the conflict between creditors and management. In this paper, the author examines how managerial entrenchment affects debt structure. The results provide a comprehensive picture of how corporate governance influences debt choice(s).

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 5 August 2019

Vaseem Akram and Badri Narayan Rath

The purpose of this paper is to examine the convergence analysis of public debt among Indian states using annual data from 1990‒1991 to 2014‒2015.

Abstract

Purpose

The purpose of this paper is to examine the convergence analysis of public debt among Indian states using annual data from 1990‒1991 to 2014‒2015.

Design/methodology/approach

The paper tests this hypothesis using club convergence technique propounded by Phillips and Sul (2007).

Findings

The results reveal the existence of debt divergence for overall Indian states. States are formed into four clubs on the basis of their level of debt, and three clubs support the hypothesis of club convergence. Further, the total public debt decomposes into three compositions such as market loans, bank loans and loans and advances from the central government. The existence of convergence is found for market loans and bank loans; however, the presence of divergence is found in case of loans and advances for overall states.

Practical implications

Since public debt plays an important role for fiscal health of the Indian states, findings of this study suggest to squeeze the fiscal consolidation further for Indian states whose debts as a percentage to gross state domestic product are on the higher side. Further, the examination of debt convergence helps to manage debt level among the states because heavy dependence on public debt could retard investment and economic growth.

Originality/value

Whereas bulk of empirical studies emphasize on examining the linkage between public debt and economic growth, and issue on debt sustainability across Indian states, examination of convergence of debt and its compositions (markets borrowings, bank loans and loans and advances from the central government) among the Indian states is scanty.

Details

Journal of Economic Studies, vol. 46 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Abstract

Details

Tools and Techniques for Financial Stability Analysis
Type: Book
ISBN: 978-1-78756-846-4

Abstract

Details

The Corporate, Real Estate, Household, Government and Non-Bank Financial Sectors Under Financial Stability
Type: Book
ISBN: 978-1-78756-837-2

Article
Publication date: 14 August 2017

David Mensah, Anthony Q.Q. Aboagye, Joshua Y. Abor and Anthony Kyereboah-Coleman

The management of external debt among highly indebted poor countries (HIPCs) in Africa still remains a challenge despite numerous packages and attempts to ameliorate the…

Abstract

Purpose

The management of external debt among highly indebted poor countries (HIPCs) in Africa still remains a challenge despite numerous packages and attempts to ameliorate the consequences of such odious debt. The purpose of this paper is to establish the factors that contribute to the growth rate of external debt and how these factors respond to shocks to external debt growth rate in Africa.

Design/methodology/approach

Data were obtained from 24 African countries and analyzed using a panel vector autoregression estimation methodology.

Findings

The study found that external debt growth rates respond positively to unit shock or changes in government investment spending, consumption spending, and domestic borrowings over a long period of time. In the medium term, external debt growth rates respond negatively to shocks in tax revenue, inflation, and output growth rates. The paper also provides empirical support that external debt may be consumed rather than invested among HIPCs in Africa.

Research limitations/implications

The findings of this paper are limited to only HIPCs in Africa.

Practical implications

This study has some few debilitating implications for external debt management among HIPCs in Africa. First, the paper suggests that debt repayment may be a problem. This is largely because external debt is consumed rather than invested. External debt sustainability needs a holistic approach in less developed countries. The findings place much emphasis on improvements in gross domestic product and tax revenues as the principal routes out of the debt doldrums. However, this option must be exploited with great caution as there is ample evidence that these poor countries increase their external borrowing capacities with improvements in economic outlook.

Originality/value

This paper fills a research gap that identifies specific components of government deficit budgets that may be contributing to the growth rate of external debts among HIPCs.

Details

Journal of Economic Studies, vol. 44 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 19 February 2021

Nirmol Chandra Das, Mohammad Ashraful Ferdous Chowdhury and Md. Nazrul Islam

The purpose of this study primarily is to investigate the heterogeneous effect of leverage on performance of the listed nonfinancial joint stock companies in Bangladesh.

Abstract

Purpose

The purpose of this study primarily is to investigate the heterogeneous effect of leverage on performance of the listed nonfinancial joint stock companies in Bangladesh.

Design/methodology/approach

A large panel sample of 165 listed nonfinancial firms under different industries of Bangladesh studied for the period 2007–2016 employing the dynamic panel approaches, namely, differenced generalized method of moments (GMM) and system GMM. The asymmetric relationship between leverage and performance is also examined by quantile regression approach.

Findings

GMM showed that the leverage indicators have the negative impact on the performance of the firms in terms of return on equity and return on asset while the quantile regressions revealed the heterogeneous relationship between leverage and profitability. It showed that greater negative impact of leverage on performance in high-profitable firms than low-profitable firms.

Research limitations/implications

The study is confined to only the listed nonfinancial joint-stock companies of Bangladesh.

Practical implications

The asymmetric relationship between leverage and financial performance identified in this study would be the helpful tool for financial managers for optimal capital structure decisions.

Originality/value

This is one of the first in-depth attempts to find the nonlinear heterogeneous effect of leverage on firms' performance.

Details

South Asian Journal of Business Studies, vol. 11 no. 2
Type: Research Article
ISSN: 2398-628X

Keywords

Article
Publication date: 27 December 2021

Wellington Charles Lacerda Nobrega, Cássio da Nóbrega Besarria and Edilean Kleber da Silva Bejarano Aragón

This paper aims to investigate the existing relations between the management of public bonds on the dynamics of debt, term structure of interest rates and economic cycle…

Abstract

Purpose

This paper aims to investigate the existing relations between the management of public bonds on the dynamics of debt, term structure of interest rates and economic cycle, through a dynamic stochastic general equilibrium model (DSGE), which was estimated through Bayesian inference techniques using data from Brazil.

Design/methodology/approach

The model developed was used to investigate the effects of the public debt average maturity management when the economy faces a monetary policy shock. For this, three management scenarios are evaluated, including Brazilian securities average term.

Findings

Contrary to what might be inferred from DSGE models that limited the analysis of the debt term by imposing only one-period bonds, a contractionary monetary policy shock does not necessarily cause public debt to increase significantly. Debt term structure plays a crucial role in this result since the government does not need to roll the debt over at higher costs when the debt term profile is longer, reducing the debt service costs and then the impact on the overall debt.

Originality/value

Despite the relevance of this theme and its implications for the dynamics of the economy, there is still a gap to be filled in the literature when using DSGE models, since most part of the work that used this methodology limited the analysis of the debt term by imposing that government issues only one-period bonds. This paper differs from the others insofar as it promotes an investigation focused on the role played by debt maturity management on the performance of the contractionary monetary policy. This approach can generate a better understanding of debt management policy and its interaction with fiscal and monetary policies.

Details

Journal of Economic Studies, vol. 49 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Expert briefing
Publication date: 2 August 2019

Kenya's debt difficulties.

Book part
Publication date: 11 January 2021

Chi Lo

Abstract

Details

China's Global Disruption
Type: Book
ISBN: 978-1-80043-794-4

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