scholarly journals Financial constraint, trust, and export performances: firm-level evidence from Africa

2021 ◽  
pp. 1-23
Author(s):  
Maty Konte ◽  
Gideon Ndubuisi
Keyword(s):  
Financial Constraints ◽  
Interpersonal Trust ◽  
Negative Relationship ◽  
Financial Constraint ◽  
African Countries ◽  
Firm Level ◽  
Country Level ◽  
The World Bank ◽  
Negative Effect ◽  
Enterprise Surveys

Abstract Several existing studies have documented a negative relationship between firm financial constraint and export activities but do not attempt to examine factors that could attenuate this relationship in Africa. In this paper, we examine the effect of financial constraint on exports in Africa and explore how the level of trust in countries where firms are located shapes this relationship. We combine the World Bank Enterprise Surveys with different measures of country-level personal and interpersonal trust computed from the Afrobarometer surveys of 19 African countries. Our results show that financial constraints negatively affect export activities. However, this negative effect is attenuated for firms that are located in trust-intensive societies. These findings are robust to different specifications. Interestingly, we find that small and medium-sized enterprises in Africa are more likely to be affected by financial constraints but also more likely to benefit from a higher level of both personal and interpersonal trust, while for larger firms only interpersonal trust matters.

Evaluation of Firm Performances in Emerging Markets

2020 ◽  
pp. 329-354
Author(s):  
Seda Ekmen Özçelik
Keyword(s):  
Emerging Markets ◽  
Total Factor Productivity ◽  
Labor Productivity ◽  
Value Added ◽  
Factor Productivity ◽  
Firm Level ◽  
Average Value ◽  
The World Bank ◽  
The World ◽  
Enterprise Surveys

This chapter provides basic understanding of firm performance in emerging markets by focusing on labor productivity and total factor productivity. In the study, labor productivity is measured in terms of average value added per worker. Total factor productivity is obtained from estimations of Cobb-Douglas production function where value added is a function of labor and capital. Data is obtained from the firm-level Enterprise Surveys by the World Bank. According to the results, differences in average labor productivities are significant among the sectors within each emerging region. Also, the value of factor elasticities changes across sectors as well as across regions. Moreover, the elasticity of capital is lower than the elasticity of labor for all sectors in regions. It implies that labor plays a more significant role and the firms are operating in a more labor-intensive production process in emerging markets.

Financial constraints and marketing investment: evidence from text analysis

2020 ◽  
Vol 54 (3) ◽  
pp. 525-545 ◽  
Author(s):  
Sagarika Mishra ◽  
Mike T. Ewing
Keyword(s):  
Financial Constraints ◽  
Ordinary Least Squares ◽  
Mediating Effect ◽  
Financial Constraint ◽  
Content Type ◽  
Specific Analysis ◽  
Intangible Investments ◽  
Negative Effect ◽  
Brand Capital ◽  
Intangible Investment

Purpose The purpose of this study to examine the effect of financial constraint on intangible investment because intangible investment provides an overall picture of marketing investment and activity. Intangible investment also plays a significant role in facilitating future sales. Using a new measure of intangible investment (Peters and Taylor, 2017), the authors first establish that intangible investment is positively related with future sales. Then, using a new text-based measure of financial constraint, the authors show that financial constraint has a significant negative effect on future intangible investments after controlling for other factors. Intangible investment has three components. The first is R&D, the second is 30 per cent of selling and general administrative expense (SGA) and the third is other intangibles. The authors find that the negative and significant effect of financial constraint on 30 per cent SGA is stronger. This indicates that financially constrained firms reduce marketing related investments. The authors then considered firm size and found that smaller firms facing financial constraint continue to increase their intangible investments, whereas larger firms reduce their intangible investment. As a robustness test, the authors use advertising expenditure as a measure of promotion related investment and find that financial constraint has a negative effect on advertising spending. The authors then use two traditional measures of financial constraint in their analysis to compare with the new text-based measure. Design/methodology/approach The authors use ordinary least squares with cluster robust standard error to conduct their empirical analysis. Findings First the authors establish that intangible investment positively affects future sales. Further the authors find that financial constraint negatively affects intangible investment. Moreover, financial constraint negatively affects the brand capital of intangible investment. Research limitations/implications The authors did not conduct any industry specific analysis to see how financial constraints affect intangible investment across different industries. Industry specific analysis is important because in some industries/sectors intangibles are clearly more important than in others, so this is an important avenue for future research. It will also be interesting to explore if and how financial constraint has a mediating effect on sales growth via intangible investment and different components of intangibles. Practical implications This study identifies another important factor that can negatively affect brand capital investment. Originality/value The authors have used a measure of financial constraint and text mined all the annual reports of US firms for the period of 1994-2016 to compute this measure.

scholarly journals Impact of Remittances on Economic Growth: Evidence from Selected West African Countries (Cameroon, Cape Verde, Nigeria and Senegal)

2015 ◽  
Vol 1 (2) ◽  
Author(s):  
Muriel Adarkwa ◽  
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
West African ◽  
Cape Verde ◽  
Series Data ◽  
African Countries ◽  
The World Bank ◽  
Negative Effect ◽  
The Impact ◽  
Positive Effect

Remittances from abroad play a key role in the development of many West African countries. Remittances tend to increase the income of recipients, reduce shortage of foreign exchange and help alleviate poverty. This research examines the impact of remittances on economic growth in four selected West African countries: Cameroon, Cape Verde, Nigeria and Senegal. Using developmentalist, structuralist and pluralist views on remittances, a linear regression was run on time series data from the World Bank database for the period 2000–2010. After a critical analysis of the impact of remittances on economic growth in these four countries, it was found that inflow of remittances to Senegal and Nigeria has a positive effect on these countries’ gross domestic product whereas for Cape Verde and Cameroon it had a negative effect. Cameroon benefitted the least from remittances and Nigeria benefitted the most within the period. One contribution of this study is the finding that remittance inflows need to be invested in productive sectors. Even if remittances continue to increase, without investment in productive sectors they cannot have any meaningful impact on economic growth in these countries.

scholarly journals Financial Constraints, Corporate Savings and Labor Income Share—Based on China’s Economic Transition

2021 ◽  
Vol 14 (1) ◽  
pp. 346
Author(s):  
Jing Ma ◽  
Qiuyun Zhao ◽  
Qing Li ◽  
Hao Yang
Keyword(s):  
Financial Constraints ◽  
Economic Transition ◽  
Negative Relationship ◽  
Economic Transformation ◽  
Labor Income ◽  
Firm Level ◽  
Income Share ◽  
Industrial Enterprises ◽  
Savings Rate ◽  
China’S Economy

What causes are responsible for China’s declining labor income share? We investigate this phenomenon in depth from the standpoint of financial constraints. By summarizing the stylized facts of China’s economy, this paper demonstrates that as China’s economy transforms, the financial market’s imperfections lead to more efficient (non-state-owned) enterprises inclined to use corporate savings for the purpose of “crowding out” workers’ remuneration for endogenous financing, resulting in a rising savings rate and a declining share of labor income. On this foundation, we construct a more general theoretical model regarding China’s economic transformation, propose research propositions, and conduct an empirical study utilizing the Chinese Industrial Enterprises Database from 1999 to 2007. The findings show a strong negative relationship between the financial market imperfections and the labor income share, with a 1% increase in financial constraints reducing labor income share by 0.051%. The rise in savings as a result of the financial restrictions works as a mediator variable in this process. Furthermore, our prediction for the path of the labor income share suggests that China’s savings rate would decline after reaching its peak, while the labor income share will bottom out and rebound by the end of the country’s economic transition. This study uses firm-level micro-data to reveal the internal mechanism of financial constraints lowering labor income share, which is a useful supplement to the existing literature. It also provides empirical evidence and policy options for developing countries to reform their financial systems and increase labor income share in the pursuit of sustainable development.

The effect of financial constraints on innovation in developing countries

2019 ◽  
Vol 28 (3) ◽  
pp. 273-308
Author(s):  
Misraku Molla Ayalew ◽  
Zhang Xianzhi
Keyword(s):  
Adverse Effect ◽  
Developing Countries ◽  
Firm Size ◽  
Financial Constraints ◽  
Age Groups ◽  
Probit Model ◽  
African Countries ◽  
Firm Level ◽  
Content Type ◽  
Recursive Bivariate Probit

Purpose The purpose of this paper is to investigate the effect of financial constraints on innovation in developing countries. It also examines how the effect of financial constraints varies by sector and with main firm characteristics such as size and age. Design/methodology/approach The study utilizes matched firm-level data from two sources; the World Bank Enterprise Survey and the Innovation Follow-Up Survey. From 11 African countries, 4,720 firms have been included in the sample. A recursive bivariate probit model is used. Findings The result shows that financial constraints adversely affect a firm’s decision to engage in innovative activities and the likelihood to have product innovation and process innovation. The results point out that the extent of the adverse effect of financial constraints on innovation differs across the sectors, firm size and age groups. A firm’s innovation is also explained by firm size, R&D, cooperation/alliance, the human capital of the firm, staff training, public financial support and export. At last, the probability of encountering financial constraints is explained by firms’ ex ante financing structure, amount of collateral, accounting and auditing practices and group membership. Practical implications Managers should strengthen the internal and external financing capacity to reduce financing constraints and their adverse effect on innovation. Social implications A pending policy task for African leaders is to design and evaluate reforms that reduce the adverse effects of financial constraints on innovation. Originality/value This study contributes to the existing literature on financing of innovation by examining how and to what extent financial constraints affect innovation across various sectors, size and age groups.

scholarly journals THE IMPACTS OF CORRUPTION ON FIRM PERFORMANCE: SOME LESSONS FROM 40 AFRICAN COUNTRIES

2016 ◽  
Vol 21 (04) ◽  
pp. 1650022 ◽  
Author(s):  
COLIN C. WILLIAMS ◽  
ABBI M. KEDIR
Keyword(s):  
Firm Performance ◽  
Cost Benefit ◽  
Evidence Base ◽  
Current Evidence ◽  
African Countries ◽  
Firm Level ◽  
Public Authorities ◽  
Country Level ◽  
Current Evidence Base ◽  
The Individual

The current evidence-base regarding the impacts of corruption on firm performance is based largely on studies of individual countries and contains mixed results. Therefore, the aim of this paper is to achieve a better insight into this relationship by reporting the results of a firm-level analysis of the impacts of corruption on firm performance using World Bank Enterprise Survey (WBES) data across 40 African countries. The clear result is that corruption significantly enhances rather than harms annual sales, employment and productivity growth rates. The outcome is to re-theorize participation in acts of corruption as beneficial for the individual firms engaged in such activity, while recognizing the wider evidence that this is not an optimal strategy at the aggregate country level. The outcome will be to advance knowledge about how corruption needs to be tackled. To eliminate corruption, it is shown here to be necessary for public authorities to recognize that corruption is an efficient strategy at the firm level and to adopt measures to alter the cost/benefit ratio confronting individual enterprises, and at the same time, to address the country-level formal institutional deficiencies that characterize many developing countries and result in the prevalence of corruption.

scholarly journals CSR Disclosure: Effects of Political Ties, Executive Turnover and Shareholder Equity. Evidence from China

2021 ◽  
Vol 13 (7) ◽  
pp. 3623
Author(s):  
Fawad Rauf ◽  
Cosmina L. Voinea ◽  
Khwaja Naveed ◽  
Cosmin Fratostiteanu
Keyword(s):  
Negative Relationship ◽  
Executive Turnover ◽  
Firm Level ◽  
Political Ties ◽  
Negative Effect ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Impact

The context of China fosters different contextual factors, which influences the quality of corporate social responsibility (CSR) disclosure in comparison to firms across the rest of the world. Political ties at a corporate level are one of these vital factors. This paper studies the influence of firm-level political ties (PT) and executive turnover (ET) on the quality of CSR disclosure in the context of shareholding status of departing executive in Chinese listed A-share firms. Stakeholder and Agency theories are applied to the dissemination of CSR disclosures in Chinese firms whereby we used 20,578 firm-years interpretations of Chinese registered companies between 2012 and 2019. The results foster a negative link between executive turnover and quality of CSR disclosures. In addition, a negative relationship has been found between political ties and the quality of CSR disclosure. The findings disclose that the shareholding status of departing executive moderate the relationship between the impact of political ties and executive turnover on firms quality of CSR disclosure, whilst the effect of executive turnover on the quality of CSR disclosure was found more pronounced for firms whose departing executive held larger shareholding (SH). This study contributed to the literature on the quality of CSR disclosure while recognizing the negative effect of executive turnover on a firm’s quality of CSR disclosure for politically tied firms with a reinforcing moderating role of the shareholding status of departing executive.

More or less? The effects of financial constraints on variety-seeking behavior

2020 ◽  
Vol 3 (2) ◽  
pp. 195-205
Author(s):  
Yafeng Fan ◽  
Jing Jiang ◽  
Zuohao Hu
Keyword(s):  
Financial Constraints ◽  
Financial Constraint ◽  
Positive Illusion ◽  
Product Lines ◽  
Variety Seeking ◽  
Content Type ◽  
Literature Reviews ◽  
Seeking Behavior ◽  
Negative Effect ◽  
The Relationship

PurposeIn daily life, consumers usually experience economic limitations on their consumption, which in turn results in experiencing financial constraints. The purpose of this article is to examine how feeling financially constrained influences variety seeking in consumption.Design/methodology/approachThe authors conducted three experiments to test the proposed hypotheses by applying multiple methods of manipulation of financial constraints and different measures of variety seeking.FindingsThe authors found that feeling financially constrained increases consumers’ insecurity, which in turn decreases their variety-seeking behavior. Additionally, the authors noted that individuals’ positive illusion could moderate the aforementioned effect. The negative effect of financial constraints on variety seeking only existed among consumers with a low positive illusion.Practical implicationsThe findings in this article could help marketers attain a better understanding of consumers’ choices under financial constraints and could help retailers optimize their product lines and distribution.Originality/valueThis research marks the first attempt to examine the relationship between financial constraint and variety seeking. The findings make for a valuable addition to both the financial constraint and variety-seeking literature reviews. The research study also extends the literature on how insecurity and positive illusion influence individuals’ decisions in the consumption context.

scholarly journals Finance and Employment in Developing Countries

2017 ◽  
Vol 17 (189) ◽  
Author(s):  
Mai Chi Dao ◽  
Lucy Qian Liu
Keyword(s):  
Developing Countries ◽  
Job Creation ◽  
Financial Constraint ◽  
External Financing ◽  
Working Capital ◽  
Firm Level ◽  
External Finance ◽  
The World Bank ◽  
Financing Constraint ◽  
Capital Financing

We study the effect of external financing constraint on job creation in emerging markets and developing countries (EMDC) at the firm level by looking at a specific transmission channel - the working capital channel. We develop a simple model to illustrate how the need for working capital financing of a firm affects the link between financial constraint and the firm's job creation. We show that the effect of relaxing financial constraint on job creation is greater the smaller the firm scale and the more labor-intensive its production structure. We use the World Bank Enterprise Surveys data to test the main predictions of the model, and find strong evidence for the working capital channel of external finance on firm employment.

scholarly journals Investment Cash Flow Sensitivity as a Measure of Financing Constraints: Evidence from Selected African Countries

2014 ◽  
Vol 6 (8) ◽  
pp. 647-657
Author(s):  
Letenah Ejigu Wale
Keyword(s):  
Cash Flow ◽  
Financial Constraints ◽  
A Priori ◽  
Financing Constraints ◽  
Financial Constraint ◽  
African Countries ◽  
Multidimensional Construct ◽  
Flow Sensitivity ◽  
Conflicting Evidence ◽  
Cash Flow Sensitivity

The use of investment cash flow sensitivity as a measure of financing constraints is an unresolved research agenda. This paper endeavors to explain the conflicting evidence by using proxies for both internal financial constraint and external financial constraint measures. Data is taken from selected six African countries, a region where no previous studies are conducted. It is observed that the investment curve is Ushaped when firms are classified on the basis of internal financial constraint measure (i.e. cash flow). Using external financial constraint proxies (age, size and payout) it is found that all category of firms show positive and significant investment cash flow sensitivity. This suggests that the sampled African firms are externally financial constrained. It is concluded that the way firms are a priori classified as internal vs. external financial constrained matters. This raises the issue of whether the term financial constraints itself is a multidimensional construct.

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