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1 – 10 of over 5000Saeed Al-muharrami and Y. Sree Rama Murthy
Average bank net interest margins vary widely across Gulf Cooperation Council (GCC) countries, net interest margins of Omani banks are significantly higher. The resultant low…
Abstract
Purpose
Average bank net interest margins vary widely across Gulf Cooperation Council (GCC) countries, net interest margins of Omani banks are significantly higher. The resultant low level of financial intermediation implies reduced investment and economic growth. Understanding the reason for these high and persistent spreads is important to develop a policy for improving effectiveness of the banking system. The paper aims to discuss these issues.
Design/methodology/approach
Net interest margins of Arab GCC banks during the period 1999-2012 are examined using the balanced panel regression model with bank specific, financial/market structure specific and macroeconomic factors as determinants. The method used for estimation used is the estimated generalized least squares (EGLS) method with both fixed effects and random effects.
Findings
Bank-specific variables, which explain net interest margins in GCC, are bank capitalization ratios, loan ratios and overhead expenses. Spread of banking sector (as measured by ratio of total bank credit to GDP) is positive and highly significant, implying that along with the expansion of the banking sector in GCC economies, interest margins of banks also improved. Omani banks were able to increase interest margins by aggressively marketing high yield personal and credit card loans, and, zero interest paying deposit products. The study also finds a negative relationship between concentration and net interest margin, and attempts to explain this finding which is at variance with other country studies using the price leadership model of oligopoly.
Research limitations/implications
The standard, accepted econometric model of net interest margins which has been used in earlier studies is unable to explain the high net interest margins of banks in Oman although it is able to explain interest margins in other GCC countries. There is a need to develop non econometric models. More work is needed on the implications of NIM spreads for how they affect an economy.
Practical implications
The study shows that as the banking sector spreads in the economy, individual banks have more opportunities to market their products while at the same time maintaining interest margins. Bank managements should note this point and look for opportunities to expand.
Originality/value
There is no evidence of any empirical studies which focused on net interest margins in the GCC countries. This study attempts to fill in this gap with a view to nudge policy makers to look at the issue of high interest margins and its detrimental impact on economic growth and development in the Gulf region. The paper is useful for policy makers to understand and rectify the problem of excessive interest spreads which is hurting the financial intermediation process.
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The purpose of this paper is to investigate the impact of corporate board characteristics on the financial performance of Nigerian quoted firms. Board characteristics studied…
Abstract
Purpose
The purpose of this paper is to investigate the impact of corporate board characteristics on the financial performance of Nigerian quoted firms. Board characteristics studied comprise board size, board skill, board nationality, board gender, board ethnicity and CEO duality.
Design/methodology/approach
The study employed the random‐effects and fixed‐effects generalised least squares (GLS) regression to test the six hypotheses formulated for the study, while controlling for firm size and firm age.
Findings
Using panel data from 122 quoted firms in Nigeria between 1991 and 2008, it was found that board size, CEO duality and gender diversity were negatively linked with firm performance, whereas board nationality, board ethnicity and the number of board members with a PhD qualification were found to impact positively on firm performance. The result of the robustness test using the same board characteristics for 160 small firms showed that board duality was positively linked to firm performance, while a PhD qualification was negatively linked to firm performance.
Practical implications
The study contributes to the understanding of the board‐performance link by examining both the traditional variables such as board size, CEO duality and other organisational attributes such as ethnic diversity, foreign nationality and competence variables represented by women and PhD holders, respectively. The results provide an insight for practitioners and policy makers on the importance of relying on institutional specifics in the prescription of corporate governance codes.
Originality/value
The study adds value to the global corporate governance discourse in two ways: first, the use of Nigeria, which is claimed to have one of the weakest business cultures in the world, and secondly, using a good number of proxies that are country‐specific for corporate boards.
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Habib Kachlami and Darush Yazdanfar
The purpose of this paper is to study the firm-level financial variables affecting the growth of small and medium-sized enterprises (SMEs).
Abstract
Purpose
The purpose of this paper is to study the firm-level financial variables affecting the growth of small and medium-sized enterprises (SMEs).
Design/methodology/approach
The study applies a resource-based view to analyze the firm-level as well as industry-level determinants of SME growth. Empirical evidence has also been provided from a data set of SMEs in Sweden to support the hypotheses. For a robust statistical analysis, three models – ordinary least squares (OLS) regression, random-effects regression and fixed-effects regression – are used to examine the influence of explanatory variables on growth.
Findings
The findings of this study show a positive and significant influence of profitability, short-term debt and size on a firm’s growth across all three models. Results regarding the influence of long-term debt on growth, however, are mixed. While the results of a fixed-effect model show the negative and significant influence of long-term debt on growth, the results according to OLS and random effects show long-term debt positively related to growth.
Research limitations/implications
This study has been conducted over a period of four years and in the context of Sweden which may limit the generalizability of its results for longer periods and for different contexts. Moreover, the low explanatory power of the models implies the need to also consider other types of variables, such as managerial or socio-economic variables, to better explain the determinants of SME growth.
Practical implications
Understanding the determinants of growth can be important for policy makers, SME managers and financial institutions. The findings of this study can be used for designing policies which stimulate SME growth. Realizing the financial resources that influence growth can also help SME managers and financial institutions to understand each other’s need for better cooperation.
Originality/value
This paper applies different models for analyzing large and cross-sectoral data regarding SME growth in the context of Sweden.
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Fekri Ali Shawtari, Mohamed Ariff and Shaikh Hamzah Abdul Razak
The purpose of this paper is to examine the determinants of bank margins in the Yemeni banking sector for Islamic and conventional banks. The first objective is to investigate…
Abstract
Purpose
The purpose of this paper is to examine the determinants of bank margins in the Yemeni banking sector for Islamic and conventional banks. The first objective is to investigate whether there is a significant difference between the margins of conventional and Islamic banks. The second objective is to examine whether efficiency represents an influential factor in determining bank margins for Islamic and conventional banks controlling for other micro and macro variables.
Design/methodology/approach
Using a data set of banks in Yemen for the post-liberalisation period from 1996 to 2011, the study utilises panel data with unbalanced observations for 16 banks, of which four are Islamic banks and the remainder conventional banks. Parametric and non-parametric techniques are complemented by dummy variable regression using random effects. Panel fixed effects regression was also undertaken as a robustness check.
Findings
The paper finds that the overall bank margin in Yemen has steadily decreased during the observation period with the exception of the year 2011. The parametric and non-parametric results show that the bank margins are significantly higher for conventional banks than for Islamic banks. The results provide evidence that bank margins are related to neither types of efficiency, but are affected by capitalisation, size, the opportunity cost of the reserve and liquidity, although the impact is shaped differently for Islamic and conventional banks.
Practical implications
The paper provides a basis for regulators and bankers for assessing the viability of the banking sector and proposes policies to restructure the industry to enhance its performance.
Originality/value
This paper adds value to the literature for the Yemeni banking sector and extends the previous research on the determinants of bank margins by focusing on the impact of efficiency on bank margins. Also, it compares the Islamic banks with different types of conventional banks in Yemen in their margins trend.
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Hassan Gholipour Fereidouni, Youhanna Najdi and Reza Ekhtiari Amiri
Unhappiness has been recognized as one of the main factors that cause political unrest in the Middle East and North Africa (MENA) region in recent years. The purpose of this study…
Abstract
Purpose
Unhappiness has been recognized as one of the main factors that cause political unrest in the Middle East and North Africa (MENA) region in recent years. The purpose of this study is to investigate the effects of governance matters on happiness in the MENA region while controlling for other relevant determinants.
Design/methodology/approach
The paper applies panel random effects regression analyses by using data from 14 MENA countries over the period of 2009-2011.
Findings
The empirical results show that higher level of political stability and absence of violence, government effectiveness and rule of law significantly increase happiness in the region. Furthermore, the paper finds that voice and accountability, regulatory quality and control of corruption variables have positive relationship with happiness but are not significant.
Originality/value
Most studies in this area cover developed countries. Since findings for developed countries might not be directly transferable to emerging economies such as MENA countries, therefore, more work is necessary to obtain a clearer picture of the political determinants of happiness in this region.
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Khushboo Aggarwal and V. Raveendra Saradhi
The aim of this study is to examine the nature and determinants of stock market integration between India and other Asia–Pacific countries (Malaysia, Hong Kong, Singapore, South…
Abstract
Purpose
The aim of this study is to examine the nature and determinants of stock market integration between India and other Asia–Pacific countries (Malaysia, Hong Kong, Singapore, South Korea, Japan, China, Indonesia, the Philippines, Thailand and Taiwan) over the period 1991–2021.
Design/methodology/approach
Unit root tests, the dynamic conditional correlation-Glosten Jagannathan and Runkle-generalized autoregressive conditional heteroscedasticity (DCC-GJR-GARCH), pooled ordinary least squares (OLS) regression and random effects models are employed for the analysis.
Findings
The empirical results show that the DCC between each pair of sample countries is less than 0.5, indicating weak ties between the pairs of sample countries. Also, the DCC between India and other Asia–Pacific stock markets is positive and low, implying low level of integration. The correlation between India and China stock markets is found to be the highest, implying significant level of integration. The main reason for it would be strong economic linkages and bilateral trade relationship between India and China. Moreover, gross domestic product (GDP), interest rate (IR), consumer price index (CPI)-inflation and money supply (MS) differentials are the major driver of stock market integration between India and other Asia–Pacific countries.
Practical implications
The findings of the study have important implications for investors, portfolio managers and policymakers. It is found that the DCC between India and other Asia–Pacific countries (considered in the study) except China is low, which indicates weak ties between the pairs of sample countries. This implies that the Indian stock market provides good investment opportunities for foreign investors. Also, investors and portfolio managers can attain more diversified benefits and can minimize country risk by investing across Asia–Pacific countries. Further, knowledge about the factors that integrate the Indian stock market with the other Asia–Pacific stock markets will help policymakers frame suitable economic and financial stabilization policies.
Originality/value
This study contributes to the extant literature: first, by examining the linkages of Indian stock market with other Asia–Pacific countries; second, although previous studies confirmed the existence of linkages among the various stock markets, few researchers pay attention to the factors driving the process of stock market integration. This study provides additional evidence by examining the significant macroeconomic factors driving the process of such integration in the Asia–Pacific region considered under the study.
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Roxana Gutiérrez-Romero and Luciana Méndez-Errico
This chapter assesses the extent to which historical levels of inequality affect the creation and survival of businesses over time. To this end, we use the Global Entrepreneurship…
Abstract
This chapter assesses the extent to which historical levels of inequality affect the creation and survival of businesses over time. To this end, we use the Global Entrepreneurship Monitor survey across 66 countries over 2005–2011. We complement this survey with data on income inequality dating back to early 1800s and current institutional environment, such as the number of procedures to start a new business, countries’ degree of financial inclusion, corruption and political stability. We find that, although inequality increases the number of firms created out of need, inequality reduces entrepreneurial activity as in net terms businesses are less likely to be created and survive over time. These findings are robust in using different measures of inequality across different points in time and regions, even if excluding Latin America, the most unequal region in the world. Our evidence then supports theories that argue early conditions, crucially inequality, influence development path.
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Mohd Irfan, Sarani Saha and Sanjay Kumar Singh
The purpose of this study is to examine the firms’ determinants of being acquired in Indian manufacturing sector. There is evidence of relationship between likelihood of being…
Abstract
Purpose
The purpose of this study is to examine the firms’ determinants of being acquired in Indian manufacturing sector. There is evidence of relationship between likelihood of being acquired and several firm specific characteristics such as age, size, research and development (R&D), advertising intensity, productivity, leverage, profitability, intangible assets and financial constraints. However, little is known about the association between these characteristics and likelihood of acquisition in Indian manufacturing sector.
Design/methodology/approach
The sample is a panel of 2,189 Indian manufacturing firms spanning almost 10 years (1998-2007). Random effects logistic (REL) regression model is adopted to control the firm specific unobserved heterogeneity in the sample. This is an essential requirement for providing accurate and effective determinants of being acquired.
Findings
Empirical results reveal that the determinants of being acquired in Indian manufacturing sector are age, size, R&D intensity, advertising intensity, productivity and leverage. The findings indicate that increase in firms’ age, size, R&D intensity and advertising intensity increases the likelihood of being acquired. However, increase in productivity and leverage decreases the likelihood of being acquired.
Research limitations/implications
Findings of this study may be useful for potential targets to arrive at more thoughtful assessment of their attractiveness and, accordingly, promote their acquisition as a more efficient mode of exit.
Originality/value
The paper contributes some empirical evidence on the determinants of being acquired in Indian manufacturing sector by using panel data and REL regression model.
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This paper aims to investigate empirically whether Sukuk financing is boosting the economic growth in Southeast Asia within the framework of the endogenous growth model.
Abstract
Purpose
This paper aims to investigate empirically whether Sukuk financing is boosting the economic growth in Southeast Asia within the framework of the endogenous growth model.
Design/methodology/approach
This paper applied dynamic panel one-step system generalized method of moments as an optimal estimation approach to investigate the impact of Sukuk financing on economic growth in Southeast Asia spanning from 2013Q4–2019Q3. Sukuk financing was proxied by the total issued Sukuk holdings, while economic growth was proxied by gross domestic product. The sample covered all full-fledged Islamic financial institutions in the most developed Sukuk financial markets countries in Southeast Asia (Malaysia, Indonesia and Brunei).
Findings
The findings demonstrated that Sukuk financing is boosting economic growth in Southeast Asia, which reflects the significant role of the Islamic financial markets of Sukuk as a vital contributor to economic growth.
Practical implications
This paper would fill the literature by investigating the link between Sukuk financing and economic growth in Southeast Asia within the framework of the endogenous growth model, as the outcome of this paper serves as a guide for financial researchers, decision-makers and policymakers to improve the Sukuk market globally as an alternative financing source for the best contribution to economic growth.
Originality/value
This paper is the first that investigates empirically the link between Sukuk financing and economic growth in Southeast Asia with a new theoretical context of the endogenous growth model to gain robust information about this link.
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Erick Rading Outa, Nelson Maina Waweru and Peterson Kitakogelu Ozili
The purpose of this study is to examine the capital market effects of corporate governance (CG) practices of a “comply or explain” environment on stock market liquidity in a…
Abstract
Purpose
The purpose of this study is to examine the capital market effects of corporate governance (CG) practices of a “comply or explain” environment on stock market liquidity in a frontier market.
Design/methodology/approach
Using secondary data from Nairobi Securities Exchange, the liquidity position is analyzed using panel data random effects regression against CG guidelines.
Findings
The results show a negative and significant relationship between CG compliance and stock market liquidity, suggesting that regulated CG practices improve market liquidity in Kenya. The results are remarkably robust to different measures of liquidity and supports agency and signaling theory.
Practical implications
The authors provide evidence to show that security regulation improves stock market liquidity in a frontier market whose characteristics are thought not to favor regulation. Therefore, regulators and stakeholders could be motivated by the benefits of regulation, and this could lead to renewed effort to improve CG compliance.
Originality value
The findings show that security market regulation through CG guidelines can improve stock market liquidity in frontier markets. This offers regulators and policymakers a strong motivation to enhance security regulation to improve capital market confidence.
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