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This study aims to investigate the impact of the macroeconomic environment on South African industrial sector returns.

Using standardized coefficients derived from time-series factor models, the authors quantify the impact of macroeconomic influences on industrial sector returns. The authors analyze the structure of the resultant residual correlation matrices to establish the level of factor omission and apply a factor analytic augmentation to arrive at a specification that is free of omitted common factors.

The authors find that global influences are the most important drivers of returns and that industrial sectors are highly integrated with the global economy. The authors show that specifications that comprise only macroeconomic factors and proxies for omitted factors in the form of residual market factors are likely to be underspecified. This study demonstrates that a factor analytic augmentation is an effective approach to ensuring an adequately specified model.

The findings have a number of implications that are of interest to investors, econometricians and researchers. While the study focusses on a single market, the South African stock market, as represented by the Johannesburg Stock Exchange (JSE), it is a highly developed and globally integrated market. In terms of market capitalization, it exceeds the Madrid Stock Exchange, the Taiwan Stock Exchange and the BM&F Bovespa. Yet, a limited number of studies investigate the macroeconomic drivers of the South African stock market.

Investors should be aware that while the South African domestic environment, especially political risk, has an impact on returns, global influences are the greatest determinants of returns. No industrial sectors are insulated from global influences and this limits the potential for diversification. This study suggests an alternative set of macroeconomic factors that may be used in further analysis and asset pricing studies. From an econometric perspective, this study demonstrates the usefulness of a factor analytic augmentation as a solution to factor omission in models that use macroeconomic factors to proxy for systematic influences that describe asset prices.

The contribution lies in providing insight into a large and well-developed yet understudied financial market, the South African stock market. This study considers a much broader set of macroeconomic factors than prior studies. A methodological contribution is made by estimating and interpreting standardized coefficients to discriminate between the impact of domestically and internationally driven factors. This study shows that should coefficients not be standardized, inferences relating to the relative importance of factors will differ. Finally, the authors unify an approach of using pre-specified factors with a factor analytic approach to address factor omission and to ensure a valid and readily interpretable specification.

I. Introduction For over forty years, a model for Third World development has gained widespread acceptance. Three key premises underpin the traditional development model: (1) the identification of “development” with the maximization of the rate of national economic growth; (2) the quest to achieve Western living standards and levels of industrialization which require the transfer of labor from the agricultural to the industrial sector as well as increased consumerism; and (3) the integration into the interdependence of Third World nations in the global economy and the global marketplace. Increasing the demand for a Third World nation's exports (in other words, export‐led growth) is viewed as leading to the maximization of a nation's Gross National Product (GNP).

This paper aims to deepen the understanding of the relationship between global economic uncertainty and price volatility, specifically focusing on commodity, industrial materials and energy price indices as proxies for global inflation, analyzing data from 1997 to 2020.

The dynamic conditional correlation generalized autoregressive conditional heteroscedasticity model is used to study the dynamic relationship between variables over a while.

The results demonstrated a positive relationship between commodity prices and the global economic policy uncertainty (GEPU). Except for 1999–2000 and 2006–2008, the results of the energy price index model were very similar to those of the commodity price index. A predominant positive relationship is observed focusing on the connection between GEPU and the industrial material price index. The results of the pairwise Granger causality reveal a unidirectional relationship between the GEPU – the Global Commodity Price Index – and the GEPU – the Global Industrial Material Price Index. However, there is bidirectional causality between the GEPU – the Global Energy Price Index. In sum, changes in price indices can be driven by GEPU as a political factor indicating unfavorable economic conditions.

This paper provides a deeper understanding of the role of global uncertainty in the global inflation process. It fills the gap in the literature by empirically investigating the dynamic movements of global uncertainty and the three most important groups of prices.

The purpose of this study is to examine the association between non-audit service fees provided by the auditor and auditor independence in stable and unstable economic conditions. Further, this study investigates whether client importance impairs auditor independence in two different Australian economic environments.

This study focuses on financially distressed firms listed on the Australian Stock Exchange from 2005 to 2014. The data is obtained from SIRCA and the Morning Star databases. The probit method is used as a baseline regression model, the two-stage least squares and the sensitivity of control variable tests are used to control for any endogeneity and self-selection bias concerns.

This study shows that in stable economic conditions, non-audit service fees provided by auditors impair auditor independence. This suggests that economic bonding between auditor and client serves as a threat to the auditor’s independence, perhaps because of the importance given to the larger clients. In contrast, the authors find no association between non-audit service fees and auditor independence in unstable (highly regulated) economic conditions largely because of higher litigation risk. The results of this study are robust to alternative model specifications and endogeneity concerns.

This study provides an important implication to regulators that macro-economic conditions influence the strength of incentives related to non-audit services for auditors. Furthermore, this study enhances the understanding of regulators (Australian Security Investment Commission) and the strategies adopted by Australian auditors in response to economic incentives and market-based incentives.

The authors contribute to the existing literature by providing evidence that there is a tradeoff between market-based incentives (i.e. lower litigation costs) and economic incentives (i.e. non-audit services fees) with economic uncertainty influencing the importance of these incentives to auditors.

The purpose of this paper is to empirically assess the effect of the factors contributing to the recovery from this crisis in terms of national GDP growth among the G7, Asian7, and Latin American7 countries.

The author uses a multivariate regression analysis of the determinants of the global financial crisis recovery.

Based on data from 21 developed and developing emerging market economies the author found that good macroeconomic fundamentals together with more open financial policy, financial liberalization, financial depth, domestic performance, and favored global conditions do linearly influence national GDP growth. Over 85 percent of cross-country variations in GDP growth during the recovery phase of the global financial crisis can be explained by its linear dependency on pre-crisis national GDP growth, financial liberalization, financial depth, domestic performance, as well as interaction terms between various explanatory variables. Cross-country differences in national GDP growth also linearly depend on macroprudence and on favorable global conditions.

Results of such empirical examination may enable governments in developing countries devise resilience strategies that may serve as powerful tools for dealing with future global financial crises.

Purpose – This chapter draws on several areas of scholarship to consider the impact of economic crises on the utility of economic costly signalling theory (ECST).

Design/methodology/approach – The chapter introduces the problem of economic crises into the debate over ECST to better understand its practical utility. It first highlights the pacific benefits anticipated by ECST to provide a conceptual baseline. It then reviews contemporary economic and political science literature that links economic integration, economic crises and external conflict. Finally, it introduces a perspective on how the conditions created by economic crises reduce the ability and willingness of states to send economic costly signals.

Findings – The chapter finds that the value of ECST to security policy is problematic when considering the occurrence of economic crises.

Originality/value – This chapter advances the debate over capitalist peace theory by introducing the problem of economic crises to the discourse.

This study aims to uncover the main predictors of financial distress in the Gulf Cooperation Council (GCC) countries using a wide range of global factors and asset classes.

This study uses novel approaches that take into account extreme events as well as the nonlinear behavior of time series over various time intervals (i.e. short, medium and long term) and during boom and bust episodes. This study primarily uses the conditional value at risk (CoVaR), the quantile multivariate causality test and the partial wavelet coherence method. The data collection period ranges from March 2014 to September 2022.

US T-bills and gold are the primary factors that can increase financial stability in the GCC region, according to VaRs and CoVaRs. More proof of the predictive value of the oil, gold and wheat markets, as well as geopolitical tensions, uncertainty over US policy and volatility in the oil and US equities markets, is provided by the multivariate causality test. When low extreme quantiles or cross extreme quantiles are taken into account, these results are substantial and sturdy. Lastly, after adjusting for the effect of crude oil prices, this study’s wavelet coherence results indicate diminished long-run connections between the GCC stock market and the chosen global determinants.

Despite the implications of the author’s research for decision makers, there are some limitations mainly related to the selection of Morgan Stanley Capital International (MSCI) GCC ex-Saudi Arabia. Considering the economic importance of the Kingdom of Saudi Arabia (KSA) in the region, the author believes that it would be better to include this country in the data to obtain more robust results. In addition, there is evidence in the literature of the existence of heterogeneous responses to global shocks; some markets are more vulnerable than others. This is another limitation of this study, as this study considers the GCC as a bloc rather than each country individually. These limitations could open up further research opportunities.

These findings are important for investors seeking to manage their portfolios under extreme market conditions. They are also important for government policies aimed at mitigating the impact of external shocks.

The purpose of this study is to determine whether the economic environment affects the merger and acquisition (M&A) activities in the restaurant industry.

The M&A transactions in the restaurant industry between 1981 and 2013 (n = 1,415) were examined. Data were collected from the Securities Data Corporation (SDC) database. Using an autoregressive distributed lag approach, this study developed three error correction models to explore the short- and long-term relationships between restaurant M&A activities and four macro-economic factors.

This study found that there was a long-term equilibrium relationship between the M&A activities and the four economic factors and that economic outlook had a significantly positive impact in the long term, while the effect of cost of debt was significantly negative in both the short and long terms. The findings suggest that restaurant firms are more likely to adopt M&A strategy when they are optimistic about the future economy and can take on debt at a low cost.

The findings of this study are expected to help practitioners make informative M&A decisions in the restaurant industry taking into consideration the economic environment. They will also help investors effectively manage their portfolios by predicting and ascertaining the proper time to invest in the restaurant industry based on the changes of economic environment.

No known study has been identified that examined the relationship between macro-economic factors and M&A activities in the restaurant industry. The findings of the study are expected to fill the gap in the literature by demonstrating the economic environment and the M&A activities in the restaurant industry are in a long-term equilibrium achieved by self-correction of their short-term disequilibrium.