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1 – 10 of 319P.K. Priyan, Wakara Ibrahimu Nyabakora and Geofrey Rwezimula
The study aims to evaluate the influence of capital structure decisions and asset structure on firms' performance for East African listed nonfinancial firms.
Abstract
Purpose
The study aims to evaluate the influence of capital structure decisions and asset structure on firms' performance for East African listed nonfinancial firms.
Design/methodology/approach
The research is descriptive and employs secondary data from the East African capital markets' websites. The generalized method of moments approach is used to estimate the relationship due to its ability to account for endogeneity problems.
Findings
The result shows that capital structure decisions and asset structure strongly influence the firms' performance. When long-term debts, short-term debts and tangible fixed assets increase, the return on total assets increases. An increase in the total debt ratio raises the return on equity (ROE). However, the increase in long-term debt lowers the ROE.
Practical implications
The results will help investors and potential investors decide on a financing policy that maximizes performance. Likewise, governments and other policymakers review the capital markets' frameworks to attract institutional and individual investors to the markets for financial availability and to increase profitability.
Originality/value
The research provides evidence on the influence of capital structure decisions and asset structure on firms' performance. Furthermore, its results contribute to firms' financing policy formulation and the corporate finance literature.
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Eric B. Yiadom, Valentine Tay, Courage E.K. Sefe, Vivian Aku Gbade and Olivia Osei-Manu
The performance of financial markets is significantly influenced by the political environment during general elections. This study investigates the effect of general elections on…
Abstract
Purpose
The performance of financial markets is significantly influenced by the political environment during general elections. This study investigates the effect of general elections on stock market performance in selected African markets.
Design/methodology/approach
Prior studies have been inconsistent in determining whether electioneering events negatively or positively influence stock market performance. The study utilized panel data set with annual observations from 1990 to 2020. The generalized method of moments (GMM) is employed to investigate the effect of electioneering and change in government on key stock market performance indicators, including stock market capitalization, stock market turnover ratio and the value of stock traded.
Findings
The study finds that electioneering activities generally have a positive impact on the performance of the stock market, whereas a change in government has a negative impact. As a result, the study recommends that stakeholders of the stock market remain vigilant and actively monitor electioneering events to devise and implement effective policies aimed at mitigating political risks during general elections. By adopting these measures, investor confidence can be significantly enhanced, fostering a more robust and secure investment environment.
Originality/value
The study investigates a neglected section of the literature by highlighting not only the effect of elections on stock market indicators but also possible change in government during elections.
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Sakiru Oladele Akinbode, Adewale Oladapo Dipeolu, Tobi Michael Bolarinwa and Oladayo Babaseun Olukowi
Some progress have been made over time in improving health conditions in Sub-Saharan Africa (SSA). There are, however, contradicting reports on the relationship between health…
Abstract
Purpose
Some progress have been made over time in improving health conditions in Sub-Saharan Africa (SSA). There are, however, contradicting reports on the relationship between health outcomes and economic growth in the region. The paper aimed at assessing the effect of health outcome on economic growth in SSA.
Design/methodology/approach
Data for 41 countries from 2000 to 2018 were obtained from WDI and WGI and analyzed using system generalized method of moment (sGMM) which is appropriate for the present scenario. AR(1) and AR(2) tests were used to assess the validity of the model while Sargan and Hansen tests were adopted to examine the validity of the instrumental variables. The robustness of the estimation was confirmed using the pooled OLS and fixed effect regression.
Findings
Health outcome (proxied by life expectancy), lagged GDP per capita, capital formation, labor force (LF), health expenditure (HE), foreign direct investment (FDI) and trade openness (TOP) significantly affected economic growth emphasizing the importance of health in the process of economic growth in the region. AR(1) and AR(2) tests for serial correlation and Sargan/Hansen tests confirmed the validity of the estimated model and the instrumental variables respectively. Robustness of the GMM results was established from the pooled OLS and the fixed effect model results.
Social implications
Improvement in the national health system possibly through the widespread adoption of National Health Insurance, increase government spending on healthcare alongside increased beneficial trade and ease of doing business to facilitate investment were recommended to enhance.
Originality/value
The study used up-to-date data with appropriate methodology.
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Andres Mauricio Gomez Sanchez, Juliana Isabel Sarmiento-Castillo and Claudia Liceth Fajardo-Hoyos
The aim of this paper is to disentangle the contemporaneous and non-contemporaneous relationship between regional business cycles and manufacturing productivity in a developing…
Abstract
Purpose
The aim of this paper is to disentangle the contemporaneous and non-contemporaneous relationship between regional business cycles and manufacturing productivity in a developing country, namely Colombia.
Design/methodology/approach
The methodology is quantitative. To deal with the problems of endogeneity in the production function and with the law motion of productivity (the Markov process), the authors obtain Total Factor Productivity (TFP) through the Wooldridge’s two equations system that can be jointly estimated under the generalized method of moments framework (GMM). Secondly, to avoid bias we estimate regional business cycles through the Kalman filter. Subsequently, we implement an instrumental variables/generalized method of moments regression (IV/GMM) to capture the contemporaneous and endogenous TFP–GDP cycles’ linkage at the regional level. Lastly, to deal with the non-contemporaneous link, the authors estimate a vector autoregressive model with exogenous variables (VARX) for each region. We also present the corresponding impulse–response functions.
Findings
The authors’ general results suggest a remarkable causality, both contemporary and non-contemporary, from productivity to GDP (but not vice versa) in the most developed regions of the country. This implied productivity could influence in the economic growth of regions in short and long runs. These results are different than those expected by economic theory and should be considered by local economic policy makers.
Research limitations/implications
The authors consider that a more detailed analysis should be carried out at the level of each sector within the manufacturing industry to further clarify these findings.
Practical implications
The policy should be oriented to obtaining cutting-edge technologies through subsidies, and also should facilitate the access to financial capital and the investment in R&D laboratories. On the other hand, the link with international trade also must be reinforced because the importing of intermediate inputs and exporting of output allow the firms to obtain embodied technologies, also to incur on learning by exporting and importing processes and finally to gain experience and competitiveness in foreign markets.
Social implications
The causality in the region that provides more than 50% of economic activity within the country (Third region) is only in one directional, from TFP towards gross domestic product (GDP) and not vice versa. As the influence from GDP towards TFP is minimal in the remaining regions, the manufacturing productivity influences both short and long run regional economic growth in Colombia. This implies that economic policy at the level of macro-region must be modified; the government should give additional support to the manufacturing sector, especially in developed regions and for the small and medium-sized enterprises (SMEs) (wich represent 92% of manufacturing firms) to increase economic growth in the future.
Originality/value
The authors’ contribution is threefold. First, they pay special attention to the contemporaneous cyclical relationship (i.e. pro-cyclical, counter-cyclical or acyclic) and the non-contemporaneous causality with productivity. Second, they estimate productivity with the GMM two equation system considering an endogenous Markov process. Third, to the best of their knowledge, at least in the case of Latin America, there are no studies in this direction combining these statistic methods, including that of Colombia.
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Claudio De Moraes and André Pinto Bandeira de Mello
This work analyzes, through social-environmental reports, whether banks with higher transparency in social-environmental policies better safeguard financial stability in Brazil.
Abstract
Purpose
This work analyzes, through social-environmental reports, whether banks with higher transparency in social-environmental policies better safeguard financial stability in Brazil.
Design/methodology/approach
The analysis is carried out through a panel database analysis of the 42 largest Brazilian banks, representing 98% of the Brazilian financial system. Seeking to avoid spurious results, we followed rigorous methodological standards. Hence, we conducted an empirical analysis using a dynamic panel data model, we used the difference generalized method of moments (D-GMM) and the system generalized method of moments (S-GMM).
Findings
The results show that the higher the transparency of social-environmental policies, the lower the chance of possible stress on the financial stability of Brazilian banks. In sum, this study builds evidence that disclosing risks related to policies about sustainability can enhance financial stability. It is essential to highlight that social-environmental transparency does not have as direct objective financial stability.
Originality/value
The manuscript submitted represents an original work that analyzes whether banks with higher transparency in social-environmental policies better safeguard financial stability. Some countries, such as Brazil, have their potential for sustainable policies spotlighted due to their green territory and diverse natural ecosystems. Besides having green potential, Brazil is a developing country with a well-developed financial system. These characteristics make Brazil one of the best laboratories for studying the relationship between transparency in social-environmental policies and financial stability.
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Jean C. Kouam and Simplice Asongu
The study assesses the non-linear nexus between fixed broadband and economic growth. The study focuses on data from 33 African countries for the period 2010 to 2020.
Abstract
Purpose
The study assesses the non-linear nexus between fixed broadband and economic growth. The study focuses on data from 33 African countries for the period 2010 to 2020.
Design/methodology/approach
The empirical evidence is based on unit root tests, panel smooth transition regression and the generalized method of moments.
Findings
The following findings are established in this study. (1) The proportion of the population with access to electricity above and below which the relationship between fixed broadband and economic growth changes in sign is about 60%. (2) Below this threshold, each 1% increase in fixed broadband subscriptions induces a decline in economic growth of about 2.58%. Above the threshold, economic growth would increase by 2.43% when fixed broadband subscriptions increase by 1%. Sensitivity analyses and generalized method of moments (GMM) estimation show that these results are robust.
Practical implications
Due to the coronavirus disease (COVID-19) pandemic, which requires countries to take adequate measures to curb the spread of the pandemic, especially by means of virtual economic activities, any national policy aiming at improving the access of populations to high levels of fixed broadband services should be preceded by the implementation of an electrification program for at least 60% of the total population. Otherwise, providing a good quality internet connection for the benefit of the population would not produce the expected effects on economic growth and would, therefore, be counterproductive.
Originality/value
This study complements the extant literature by providing thresholds at which fixed broadband affects economic growth.
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Tough Chinoda and Forget Mingiri Kapingura
This study examines the role of institutions and governance on the digital financial inclusion and economic growth nexus in Sub-Saharan Africa (SSA) from 2014 to 2020.
Abstract
Purpose
This study examines the role of institutions and governance on the digital financial inclusion and economic growth nexus in Sub-Saharan Africa (SSA) from 2014 to 2020.
Design/methodology/approach
This study adopts the generalised method of moments technique which controls for endogeneity. The authors employed four main variables namely, index of digital financial inclusion, gross domestic product per capita growth, institutions and governance.
Findings
The results suggest a significant positive effect of institutional quality and governance on the digital financial inclusion-economic growth nexus in SSA. Furthermore, the authors find that effect of trade and population growth on economic growth was significantly positive while inflation reduces economic growth in the region.
Research limitations/implications
This study also ignored the effect of digital financial inclusion on environmental quality. Future researches should focus on addressing these drawbacks and replicating the study in Africa as a whole and other developing countries across the world that are experiencing digital financial inclusion and economic growth challenges. The results from the study imply that a positive relationship between digital financial inclusion and economic growth. It is important to note that the study was carried out on the premise that institutions play a pivotal role in enhancing economic growth in SSA.
Practical implications
The results confirm the significance of policies that enhances institutional quality and governance which are other avenues the authorities can pursue to enhance economic growth in SSA.
Social implications
The paper documents the importance of institutions in boosting economic growth which impacts on social life rather than digital financial inclusion only.
Originality/value
The paper makes a contribution through analysing the role of institutions and governance on the digital financial inclusion-economic growth nexus rather than the traditional financial inclusion–economic growth nexus which is common to the majority of the available empirical studies.
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Umar Mohammed and Erdal Tanas Karagöl
This paper investigates the relationship between remittances, institutional quality and investment in Sub-Saharan African (SSA) countries using data from 2004 to 2018.
Abstract
Purpose
This paper investigates the relationship between remittances, institutional quality and investment in Sub-Saharan African (SSA) countries using data from 2004 to 2018.
Design/methodology/approach
The two-stage least squares (2SLS) estimator is the main methodology used, while the system generalized method of moments (Sys-GMM) technique is employed to test the robustness of the results.
Findings
The results show a positive and significant impact of remittances on investment in SSA. The findings further reveal a substitutional linkage between remittances and institutions in promoting investment. In essence, remittances serve as investment capital in countries with poor institutions. The results also show that the marginal significance of remittances as a source of funds for investment decreases in countries with well-developed institutions.
Research limitations/implications
The sample excludes some of the SSA countries due to the unavailability of data.
Practical implications
In the face of current institutional weaknesses, there is a need for SSA countries to prioritize policies that encourage the effective use of remittances for business activities. Furthermore, SSA countries must improve their economic freedom and democratic practices by reducing government size, protecting property rights, and promoting respect for political and civil rights.
Originality/value
This is the first study to analyze the relationship between remittances, institutional quality and investment in SSA. It also provides a novel framework for future research on the remittance–investment nexus.
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The purpose of this paper is to examine the relationship between remittances, institutions and human development (HD) in Sub-Saharan African (SSA) countries using data from 2004…
Abstract
Purpose
The purpose of this paper is to examine the relationship between remittances, institutions and human development (HD) in Sub-Saharan African (SSA) countries using data from 2004 to 2018. The study attempts to answer two critical questions: Do the increasing remittances inflow to the region have any effect on human capital development? and does the effect of remittances on human development vary depending on the level of institutional quality?
Design/methodology/approach
The analysis uses a dynamic model; system Generalized Method of Moments (Sys-GMM) as this approach controls for the endogeneity of the lagged dependent variable; thus, when there is a correlation between the explanatory variable and the error term, which is normally associated with remittances, it also controls for omitted variable bias, unobserved panel heterogeneity and measurement errors in the estimation.
Findings
The findings indicate a positive and significant impact of remittances on HD in SSA. The results further reveal a substitutional relationship between institutions and remittances in stimulating HD. The estimations mean that remittances promote HD in countries with a weak institutional environment. The findings also establish that the marginal significance of remittances as a source of capital for HD falls in countries with well-developed institutions.
Practical implications
To increase the flow of remittances, policymakers should implement policies that increase the likelihood of both skilled and unskilled migrants sending remittances.
Originality/value
Most empirical research on the impact of remittances on HD does not tackle the problem of endogeneity associated with remittances. This study, however, provides empirical evidence by using Sys-GMM that solves the problem. The current study also is the first work to examine the relationship between remittances, institutions and HD in SSA and provides a new guide for future research on the remittance and HD nexus.
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Fernanda Cigainski Lisbinski and Heloisa Lee Burnquist
This article aims to investigate how institutional characteristics affect the level of financial development of economies collectively and compare between developed and…
Abstract
Purpose
This article aims to investigate how institutional characteristics affect the level of financial development of economies collectively and compare between developed and undeveloped economies.
Design/methodology/approach
A dynamic panel with 131 countries, including developed and developing ones, was utilized; the estimators of the generalized method of moments system (GMM system) model were selected because they have econometric characteristics more suitable for analysis, providing superior statistical precision compared to traditional linear estimation methods.
Findings
The results from the full panel suggest that concrete and well-defined institutions are important for financial development, confirming previous research, with a more limited scope than the present work.
Research limitations/implications
Limitations of this research include the availability of data for all countries worldwide, which would make the research broader and more complete.
Originality/value
A panel of countries was used, divided into developed and developing countries, to analyze the impact of institutional variables on the financial development of these countries, which is one of the differentiators of this work. Another differentiator of this research is the presentation of estimates in six different configurations, with emphasis on the GMM system model in one and two steps, allowing for comparison between results.
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