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1 – 10 of over 3000Elvis Kwame Agyapong, Louis David Junior Annor and Williams Ohemeng
This paper evaluates the effect of corporate social responsibility (CSR) on the performance of rural banks, as well as the moderating influence of effective governance on the…
Abstract
Purpose
This paper evaluates the effect of corporate social responsibility (CSR) on the performance of rural banks, as well as the moderating influence of effective governance on the surmised nexus.
Design/methodology/approach
Annual data for 122 Ghanaian rural banks from ARB Apex Bank, World Development Indicator (WDI) and World Governance Indicator (WGI) for the period 2014–2020 were compiled for analysis. A two-stage system generalized method of moments (GMM) estimator was used in examining the relationships under study.
Findings
The findings suggest that CSR has a significant negative effect on return on assets (ROA), return on equity (ROE) and stability (Z-score). On the other hand, further results showed that CSR positively influences net interest margin (NIM). Again, the results suggest that government effectiveness exerts a positive moderating influence on the effect of CSR on performance from all four measurement criteria (ROA, ROE, NIM and Z-score) in the Ghanaian rural banking sector.
Originality/value
The study focuses on the rural banking sector in the Ghanaian economy, compared to related studies that examine the subject matter for commercial banks. The moderating influence of governance structures is also assessed on the relationships to guide policy on rural banking.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2023-0116.
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Sirajo Aliyu, Ahmed Rufai Mohammad and Norazlina Abd. Wahab
This study aims to empirically investigate the impact of political instability on the banking stability of the dual banking system in the Middle East and North African (MENA…
Abstract
Purpose
This study aims to empirically investigate the impact of political instability on the banking stability of the dual banking system in the Middle East and North African (MENA) countries.
Design/methodology/approach
The study measures banking stability with probability of default (PD) and Zscore by employing the generalised method of moment (GMM) between 2007 and 2021 on the dual banking system in the region. The authors further estimate short-long-run situations coupled with a robustness test using a generalised least square (GLS) model.
Findings
The authors' findings indicate that institutional factors of political stability, crisis period, high-crisis countries, law and order and macroeconomic indicators influence the two types of banking stability in the region. The authors found the consistency of the factors explaining stability in the region in both short-and long-run situations. Consequently, the study also reveals the adverse effects of crisis periods and high-crisis countries on banking stability.
Practical implications
The results of this study explicitly identify the critical need for sustaining political stability and abiding by laws and order to achieve dual banking stability in the region. Therefore, policymakers may consider allowing the region's banks to operate beyond retail banking since diversification enhances banking stability.
Originality/value
The authors' study balances by employing dual stability measurement in predicting the impact of political instability, law and order and other indicators on the MENA region's two banking models. This study uncovers the effect of the global crisis period on banking stability and high-crisis countries in the region and verifies the models' robustness.
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Ben Shepherd and Tanaporn Sriklay
The authors extend the World Bank's Logistics Performance Index (LPI) for 30 additional countries and 13 additional years. The authors develop an inexpensive method for extending…
Abstract
Purpose
The authors extend the World Bank's Logistics Performance Index (LPI) for 30 additional countries and 13 additional years. The authors develop an inexpensive method for extending survey data when frequent, universal surveys are unavailable. The authors identify groups of country characteristics that influence LPI scores.
Design/methodology/approach
Using data from the World Development Indicators—the broadest global dataset of country socioeconomic features—the authors test machine learning algorithms for their ability to predict the LPI. The authors examine importance scores to identify factors that influence LPI scores.
Findings
The best performing algorithm produces predictions on unseen data that account for nearly 90% of observed variation, and are accurate to within 6%. It performs twice as well as an OLS model with per capita income as the only predictor. Explanatory factors are business environment, economic structure, finance, environment, human development, and institutional quality.
Practical implications
Machine learning offers a simple, inexpensive way of extending the coverage of survey data. This dataset provides a richer picture of logistics performance around the world. The factors the authors identify as predicting higher LPI scores can help policymakers and practitioners target interventions.
Originality/value
This paper is one of the first applications of machine learning to extend coverage of an index based on an international survey. The authors use the new data to provide the most wide-ranging analysis of logistics performance across countries and over time. The output is an important resource for policymakers tracking performance, and researchers particularly in smaller and lower income countries. The authors also examine a wider range of explanatory factors for LPI scores than previous work.
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The unsustainable public debt of most African economies adversely affects their economic growth and stability. This study aims to explore the influence of cross-country indicators…
Abstract
Purpose
The unsustainable public debt of most African economies adversely affects their economic growth and stability. This study aims to explore the influence of cross-country indicators of governance from African countries on public debt accumulation.
Design/methodology/approach
The study deployed a quantitative research design technique. Secondary data was used in this study. The frequency of the data is annual, and it is available from 1996 to 2022 for 48 countries in Africa. The study deployed the system generalized method of moments for the estimation.
Findings
The study finds that countries with high regulatory quality standards, control corruption and ensure effective governance accumulate less government debt while countries that abide by the rule of law instead accumulate more government debt. The study also finds that economic growth and government revenue reduce government gross debt while government expenditure and investments increase public debt.
Research limitations/implications
Due to data unavailability, other factors which are likely to influence government debt accumulation were not included in the study as control variables. This is the limitation of the study.
Social implications
African governments should strive to maintain high regulatory quality standards through the formulation and implementation of sound policies and regulations that permit and promote private sector development, and ensure quality and accountability of public and civil services. Governments are also urged to control corruption and enact good laws so that the enforcement of these laws will not worsen the risk of becoming debt-distressed.
Originality/value
Recent studies on governance and public debt were focused on the Arabian Gulf countries, countries of the Middle East and North Africa (MENA) region and a combination of high and low-income countries. This study scrutinizes exclusively the effects of the quality of governance indicators on public debt accumulation, in the context of Africa.
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Josephine Ofosu-Mensah Ababio, Eric B. Yiadom, Emmanuel Sarpong-Kumankoma and Isaac Boadi
This study aims to examine the relationship between financial inclusion and financial system development in emerging and frontier markets.
Abstract
Purpose
This study aims to examine the relationship between financial inclusion and financial system development in emerging and frontier markets.
Design/methodology/approach
Using data across 35 countries over 19 years (2004–2022), the improved GMM estimation technique reveals that financial inclusion significantly contributes to the development of financial systems.
Findings
The study uses a segmented approach, dividing financial development indices into subindices: financial depth, financial access and financial efficiency. Indicators of bank financial inclusion show a positive and highly significant relationship with bank depth and access but a negative relationship with bank efficiency. Similarly, indicators of the debt market and stock market financial inclusion demonstrate positive relationships with market depth and access but negative relationships with debt and stock market efficiency. The study further examines composite indexes of financial inclusion for bank, debt and stock market segments, finding strong and highly significant relationships with market development. These results underscore the importance of promoting financial inclusion across all segments of the financial sector to achieve an inclusive financial system.
Practical implications
The implications of this research highlight the need for policymakers and practitioners to implement policies and regulations that enhance financial inclusion and foster the development of robust financial systems. By extending access to mainstream financial instruments and services, financial institutions can stimulate financial intermediation and support, thereby accelerating the development of the banking, debt and stock markets.
Originality/value
The study is robust to the use of several indicators of financial inclusion and financial development, and it forms part of the early studies that examine the close relationship between the two variables.
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Sirajo Aliyu, Ahmed Rufa′i Mohammad and Norazlina Abd. Wahab
This study aims to empirically investigate the impact of oil prices, political instability and changes in stability on the bank diversification of the two types of banking systems…
Abstract
Purpose
This study aims to empirically investigate the impact of oil prices, political instability and changes in stability on the bank diversification of the two types of banking systems in the Middle East and North African (MENA) countries.
Design/methodology/approach
The study uses bank diversification, stability measurement of probability of default and Zscore by adopting the generalised method of moment for the data between 2007 and 2021. The authors estimate short- and long-run dynamic panel analysis and a robustness test.
Findings
The findings reveal that Islamic banks are slightly lower in diversification and stability than conventional peers in the region. Diversification increases with a positive increase in GDP growth, law and order, political stability, bank size, asset quality, oil price, return on equity, profitability and change in banking asset-based stability. The authors found consistency in the two stability measurements in both short- and long-run situations.
Practical implications
Despite the change in banking stability and economic growth and oil prices improved diversification, banks in the region are not diversifying during the crisis period and political instability. Therefore, policymakers should improve mechanisms to monitor the crisis and political unrest to avoid the systemic risk that adversely affects the system through macro-financial linkages in the region.
Originality/value
This study uses change dual stability measurements and oil prices to predict MENA region bank diversification. The authors extended the banking literature by estimating the relationship between crisis periods, political and banking stability, oil prices and other institutional indicators of banking diversification. This study uncovers the effect of the global crisis period on banking diversification and the impact of banking stability changes and validates the models through robustness tests.
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Dhulika Arora and Smita Kashiramka
Shadow banks or non-bank financial intermediaries (NBFIs) are facilitators of credit, especially in emerging market economies (EMEs). However, there are certain risks associated…
Abstract
Purpose
Shadow banks or non-bank financial intermediaries (NBFIs) are facilitators of credit, especially in emerging market economies (EMEs). However, there are certain risks associated with them, such as their unchecked leverage and interconnectedness with the rest of the financial system. In light of this, the present study analyses the impact of the growth of shadow banks on the stability of the banking sector and the overall stability of the financial system. The authors further examine the effect of the growth of finance companies (a type of NBFIs) on financial stability.
Design/methodology/approach
The study employs data of 11 EMEs (monitored by the Financial Stability Board (FSB)) for the period 2002–2020 to examine the above relationships. Panel-corrected standard errors method and Driscoll–Kray standard error estimation are deployed to conduct the analysis.
Findings
The results signify that the growth of the shadow banking sector and the growth of lending to the shadow banking sector are negatively associated with the stability of the banking sector and increases the vulnerability of the financial system (overall instability). This implies that the higher the growth of the shadow banks, the higher the financial fragility. Finance companies are also found to negatively affect financial stability. These findings are validated by different estimation methods and point out the risks posed by the NBFI sector.
Originality/value
The extant study builds a composite index (Financial Vulnerability Index (FVI)) to measure financial stability; thus, the findings contribute to the evolving literature on shadow banks.
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Charles O. Manasseh, Ifeoma C. Nwakoby, Ogochukwu C. Okanya, Nnenna G. Nwonye, Onuselogu Odidi, Kesuh Jude Thaddeus, Kenechukwu K. Ede and Williams Nzidee
This paper aims to assess the impact of digital financial innovation on financial system development in Common Market for eastern and Southern Africa (COMESA). This paper…
Abstract
Purpose
This paper aims to assess the impact of digital financial innovation on financial system development in Common Market for eastern and Southern Africa (COMESA). This paper evaluates the dynamic relationship between digital financial innovation measures and financial system development using time series data from COMESA countries for the period 1997–2019.
Design/methodology/approach
A dynamic autoregressive distributed lag model (ARDL) was adopted and the mean group (MG), pooled mean group (PMG) and dynamic fixed effect (DFE) of the model were estimated to evaluate the short- and long-run impact. In addition, the dynamic generalized method of moments (DGMM) was adopted for a robustness check. The Hausman test results show PMG to be the most consistent and efficient estimator, while the coefficient of lagged dependent variable of different GMM is less than the fixed effect coefficient, and, as such, suggests system GMM is the most suitable estimator. Data for the study were sourced from World Bank Development Indicator (WDI, 2020), World Governance Indicator (WGI, 2020) and World Bank Global Financial Development Database (GFD, 2020).
Findings
The result shows that digital financial innovation significantly impacts financial system development in the long run. As such, the evidence revealed that automated teller machines (ATMs), point of sale (POS), mobile payments (MP) and mobile banking are significant and contribute positively to financial system development in the long run, while mobile money (MM) and Internet banking (INB) are insignificant but exhibit positive and inverse relationship with financial development respectively. Further investigation revealed that institutional quality and a stable macroeconomic environment including their interactive term are significantly imperative in predicting financial system development in the COMESA region.
Practical implications
Researchers recommend a cohesive and conscious policy that would checkmate the divergence in the short run and suggest a common regional innovative financial strategy that could be pursued to incentivize technology transfer needed to promote financial system development in the long run. More so, plausible product and process innovations may be adapted to complement innovative institutions in the different components of the COMESA financial system.
Social implications
Digital financial innovation services if well managed increase the inherent benefits in financial system development.
Originality/value
To the best of the authors’ knowledge, this paper presents new background information on digital financial innovation that may stimulate the development of the financial system, particularly in the COMESA region. It also exposes the relevance of digital financial innovation, institutional quality and stable macroeconomic environment as well as their interactive effect on COMESA financial system development.
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Jiapeng Wu, Dayu Gao, Cheng Xu and Yanqi Sun
This paper aims to investigate the influence of the regional business environment on local firm innovation, considering various dimensions such as administrative, financial and…
Abstract
Purpose
This paper aims to investigate the influence of the regional business environment on local firm innovation, considering various dimensions such as administrative, financial and legal environments.
Design/methodology/approach
Multiple regression analysis is employed to analyze archival data for firms listed on Chinese stock markets.
Findings
We find that the optimizations of the administrative and financial environments positively affect firm innovation, whereas the legal environment does not exert a similar impact. Our analysis also reveals that the business environment’s optimization significantly influences innovation in firms that are small, non-state-owned and operating in high-tech industries. Furthermore, the business environment acts as a moderating variable in the relationship between firm innovation and firm value.
Research limitations/implications
This study contributes to a more comprehensive understanding of institutional-level determinants of firm innovation, highlighting the nuances of the legal environment and the importance of context-specific analysis, especially in emerging markets like China.
Practical implications
Developing countries can significantly enhance firm innovation by improving the business environment, including the optimization of administrative and financial systems, reducing transaction costs and ensuring capital supply. Tailored legal frameworks and alternative institutional strategies may also be explored.
Social implications
This study explicitly emphasizes the governmental role in promoting firm innovation, shedding light on policy formulation and strategic alignment with local administrative policies.
Originality/value
To the best of our knowledge, this paper is the first to explore the relationship between the business environment and firm innovation using World Bank indicators in an emerging market context, providing novel insights into the unique dynamics of legal, financial and administrative sub-environments.
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Daniel Ofori-Sasu, Benjamin Mekpor, Eunice Adu-Darko and Emmanuel Sarpong-Kumankoma
This paper aims to examine the interaction effect of regulations (monetary and macro-prudential) in explaining the possible non-linear effect of bank risk exposures (credit risk…
Abstract
Purpose
This paper aims to examine the interaction effect of regulations (monetary and macro-prudential) in explaining the possible non-linear effect of bank risk exposures (credit risk and insolvency risk) on banking stability in Africa.
Design/methodology/approach
The study uses a two-step system generalized method of moments (GMM) estimator for a data set of banks across 54 African countries over the period 2006–2020.
Findings
The authors find that the relationships between bank credit risk–bank stability and bank insolvency risk–bank stability are non-linear and characterized by the presence of optimal thresholds, which are 5.3456 for credit risk and 2.3643 for insolvency. Contrary to their positive effects below these optimal thresholds, credit risk and insolvency risk become negatively linked to bank stability in Africa. The authors find that macro-prudential action and monetary policy both have a positive and significant relationship with bank stability. The authors provide evidence to support that the marginal effect of excessive credit risk and insolvency risk on bank stability is reduced when interacted with monetary and macro-prudential regulations, and the impact is significant in strong institutional environment.
Research limitations/implications
Future research should extend data to include developing and emerging economies in the world. Also, policymakers, researchers and practitioners should consider different regulatory and institutional frameworks in explaining the relationship between the thresholds of bank risk exposures and bank stability in the world.
Practical implications
Regulatory authorities should have to deeply reform their financial systems, develop risk-based regulatory framework and effective supervision mechanism relating to appropriate techniques that maintain an optimal and desired level of bank risks and risk-taking behaviours required to ensure a stable banking system.
Originality/value
To the best of the authors’ knowledge, this is the first study to examine how different regulatory frameworks shape the non-linear impact of bank risk exposures on bank stability in Africa.
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