The impact of debt service costs and public debt on private capital formation in South Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sheunesu Zhou
Keyword(s):  
South Africa ◽  
Public Debt ◽  
Private Investment ◽  
Capital Formation ◽  
Debt Service ◽  
Private Capital ◽  
Content Type ◽  
Debt Overhang ◽  
The Impact ◽  
The Relationship

PurposeThe aim of this paper is to analyse the relationship between public debt, corporate debt service costs and private capital formation in South Africa.Design/methodology/approachTo capture the long-run characteristic of investment, the study adopts the Fully Modified Ordinary Least Squares approach and tests for cointegration using Hansen (1992)'s Parameter Instability test.FindingsWe find that private capital formation increases in domestic debt and decreases in external debt during the pre-crisis period. However, during the period post the Global Financial Crisis, we find evidence of domestic public debt crowding out private capital formation, whereas external debt crowds-in capital formation. Debt service costs are found to reduce investment due to the effect of the debt overhang throughout the period under analysis.Research limitations/implicationsThe paper has important implications for macroeconomic policy. In particular, there is need for deleveraging and allocation of a higher proportion of debt to public infrastructure expenditure which has complementary effects on private investment.Practical implicationsDebt overhang signal that South African firms could be over-leveraged, which hinders future growth prospects. Firms that face high levels of debt should consider debt restructuring.Originality/valueEmpirical studies undertaken to explore this relationship have yielded contradicting results suggesting that the relationship between public debt and private investment is heterogeneous depending on a given economy or prevailing macroeconomic environment. In particular, existing research does not provide evidence on whether recent increases in public debt in South Africa have led to crowding-in or crowding-out of private investment. This paper therefore contributes to empirical literature on the impact of public debt on private investment within a small open economy.

Pattern of public debt and debt overhang among BRICS nations: an empirical analysis

2019 ◽  
Vol 12 (3) ◽  
pp. 345-363
Author(s):  
Justin Joy ◽  
Prasant Kumar Panda
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Granger Causality Test ◽  
Capital Formation ◽  
Debt Service ◽  
Causality Test ◽  
Content Type ◽  
Debt Overhang ◽  
Long Run ◽  
Domestic Savings

Purpose This paper aims to analyze the pattern of public debt in Brazil, Russian Federation, India, China and South Africa (BRICS) in a comparative perspective. Besides, an attempt is made to verify the existence of debt overhang as suggested by Krugman (1988) among BRICS nations. Design/methodology/approach Annual panel data for BRICS for the period 1980-2016 has been used for the analysis. Percentage ratio method has been used to analyze the pattern of debt. Panel covariate augmented Dickey–Fuller (pCADF) test has been used to verify the time series properties of the variable, while panel cointegration test of Pedroni (1999) is used to check the existence of any co-integrating vector among the variables. Panel Granger causality test is used to check the causality between the variables. Findings Co-integration result suggests that there exists a strong long-run equilibrium relationship between debt service, domestic savings, capital formation and economic growth of BRICS nations. From Granger causality test, it is observed that domestic savings and capital formation are Granger caused by debt servicing. The coefficients from fully modified ordinary least squares measure a negative impact of debt service on gross capital formation and gross domestic saving. This suggests that the payment for debt service affects capital formation and gross domestic savings adversely. Thus, it gives primary signals for debt overhang effect in BRICS nations. Practical implications Allowing debt service to negatively affect the investment and potential investment will result in slowdown or stagnation in economic growth in the long run, so strategies need to be taken in BRICS nations to check the adverse effects of rising level of debt-service-payment-to-gross national income ratio on domestic savings and capital formation. BRICS nations need to reduce their debt service payment by undertaking appropriate strategy of debt overhaul and fiscal management so that domestic savings and capital formation in the country will not be adversely affected. Besides, BRICS nations need to take measures to augment its domestic savings and capital formations. Originality/value To the best of the authors’ knowledge, no published works have analyzed the pattern of public debt for BRICS (major developing nations). Debt servicing is also not checked for BRICS in recent papers, considering overhang approach.

Government failures and non-performing loans in European countries: a spatial approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ferdinando Ofria ◽  
Massimo Mucciardi
Keyword(s):  
Public Debt ◽  
Geographically Weighted Regression ◽  
European Countries ◽  
Weighted Regression ◽  
Second Step ◽  
Ols Regression ◽  
Content Type ◽  
The Impact ◽  
The Relationship ◽  
The Eu

PurposeThe purpose is to analyze the spatially varying impacts of corruption and public debt as % of GDP (proxies of government failures) on non-performing loans (NPLs) in European countries; comparing two periods: one prior to the crisis of 2007 and another one after that. The authors first modeled the NPLs with an ordinary lest square (OLS) regression and found clear evidence of spatial instability in the distribution of the residuals. As a second step, the authors utilized the geographically weighted regression (GWR) to explore regional variations in the relationship between NPLs and the proxies of “Government failures”.Design/methodology/approachThe authors first modeled the NPL with an OLS regression and found clear evidence of spatial instability in the distribution of the residuals. As a second step, the author utilized the Geographically Weighted Regression (GWR) (Fotheringham et al., 2002) to explore regional variations in the relationship between NPLs and proxies of “Government failures” (corruption and public debt as % of GDP).FindingsThe results confirm that corruption and public debt as % of GDP, after the crisis of 2007, have affected significantly on NPLs of the EU countries and the following countries neighboring the EU: Switzerland, Iceland, Norway, Montenegro, and Turkey.Originality/valueIn a spatial prospective, unprecedented in the literature, this research focused on the impact of corruption and public debt as % of GDP on NPLs in European countries. The positive correlation, as expected, between public debt and NPLs highlights that fiscal problems in Eurozone countries have led to an important rise of problem loans. The impact of institutional corruption on NPLs reports that the higher the corruption, the higher is the level of NPLs.

scholarly journals EFFECT OF PUBLIC DEBTS ON PRIVATE-SECTOR INVESTMENT IN NIGERIA

2021 ◽  
Vol 4 (1) ◽  
pp. 96-111
Author(s):  
Osuoha Chionyeka ◽  
◽  
Theresa Udenwa ◽  
Nneka Nwala ◽  
◽  
...  
Keyword(s):  
Private Sector ◽  
Error Correction ◽  
Public Debt ◽  
Private Investment ◽  
Ordinary Least Squares ◽  
Debt Service ◽  
Private Sector Investment ◽  
Domestic Debt ◽  
Private Investors ◽  
The Impact

This study empirically analyzed the effect of Public Debt and Private-Sector Investment in Nigeria (1986-2017). This study employed secondary data in the analysis. The study used the ordinary least square method (OLS) and Error Correction Model (ECM) tools of analysis in the investigation of the impact and relationship among the economic variables. The Ordinary Least Squares (OLS) and the Error Correction Models show that there is a strong relationship between Private Investment (PIVN)in Nigeria and Public Debt in Nigeria. Public Debt in Nigeria has a negative effect on the economy both in the short run and long run especially the Public Domestic Debt in Nigeria and Public External Debts in Nigeria. This is because the more government borrows from both the domestic and the external the more it crowds out investment especially the domestic debt crowds out private investment through lack of access to funds. The ECM result revealed that Public Debt Service in Nigeria has a positive effect on Private Investment (PIVN)in Nigeria, this is because when the government pays back loans or debts, it increases access to funds by the private investors thereby increasing the level of private investment in the country. Therefore, the study recommends that government should design a mechanism for effective and efficient Public Debt Service Management in Nigeria to increase access to funds by private investors and thereby increasing and enhancing Private Investment (PIVN) in Nigeria.

The effect of carbon performance on corporate financial performance in a growing economy

2018 ◽  
Vol 14 (4) ◽  
pp. 895-916 ◽  
Author(s):  
Fortune Ganda
Keyword(s):  
South Africa ◽  
Growth Rate ◽  
Financial Performance ◽  
South African ◽  
Value Added ◽  
Content Type ◽  
Firm Financial Performance ◽  
Carbon Performance ◽  
The Impact ◽  
The Relationship

Purpose This study aims to examine the impact of carbon performance on firm financial performance by using Republic of South Africa CDP company data from 2014 to 2015. Design/methodology/approach The study considered 63 companies on the Republic of South Africa CDP database. Content analysis was used to extract both carbon performance data and firm financial data. The data were analysed using panel data analysis and partial derivative approaches. Findings The findings indicate that carbon performance produces a positive relationship with return on equity (ROE) and return on sales (ROS). Conversely, it generates a negative relationship with return on investment (ROI) and market value added (MVA). Furthermore, the study highlights that carbon performance pays and that the relationship with financial performance (ROE, ROS, ROI and MVA) deepens as the corporate growth rate increases. Practical implications Companies that integrate carbon performance initiatives reap substantial financial gains, and this relationship is strengthened as the company’s growth rate increases. Originality/value The research questions and data collected from Republic of South African CDP firms are original and provide important evidence on the impact of carbon performance on firm financial indicators. Furthermore, many empirical studies focus on highly industrialised countries; this study examines this issue in the emerging South African economy which has experienced rapid growth of emissions in recent years. While most previous studies on the relationship between carbon performance and firm financial performance used a single class of corporate financial measures, this study used both accounting- and market-based indicators. It also investigated how firm growth moderates the association between carbon performance and diverse financial performance measures. Finally, pressure exerted by green stakeholders since the introduction of the Johannesburg Stock Exchange’s sustainability criteria in 2004, as well as government policies, has a profound impact on the South African business context; it is hence important to examine corporate environmental management activities in the context of the association between carbon performance and firm performance.

Moderating effect of environmental dynamism on leadership practices and employees’ response to change in South Africa

2020 ◽  
Vol 43 (7) ◽  
pp. 787-810
Author(s):  
Sumayya Surty ◽  
Caren Brenda Scheepers
Keyword(s):  
South Africa ◽  
Leadership Practices ◽  
Moderating Effect ◽  
Strengthening Effect ◽  
Environmental Dynamism ◽  
Moderator Effect ◽  
Content Type ◽  
Response To Change ◽  
The Impact ◽  
The Relationship

Purpose The environment has become increasingly dynamic, characterised by hyper turbulence and high-velocity. While research has confirmed the influence of leadership on the effectiveness of change, the author knows less about how increased environmental dynamism influences the relationship. This study aims to investigate how this relationship is impacted under highly uncertain and dynamic external conditions. Design/methodology/approach To investigate the moderating effect of environmental dynamism on leadership practices and employees’ response to change, 1,536 employees’ survey responses were analysed from various organisations in South Africa. Moderator regression models were used to examine relationships. Findings Environmental dynamism has a slight significant strengthening effect on the relationship between leadership practices and response to change, with regard to commitment to the change; efficacy, that is, the belief in whether the change will lead to the efficacy of the organisation; and valence or attractiveness of the change. However, no significant positive moderator effect on the impact of leadership practices on active support for change. Tenure as control variable also did not have a significant influence on the model. Practical implications Organisations must take note that under dynamic conditions: employees’ belief about the efficacy of change is influenced by leadership practices, but not the active support for the change. Leadership must, thus, check whether employees’ positive responses are indeed going over in action to implement change. Originality/value This study contributes an important moderator effect: the more dynamic the environment, the greater the impact leadership practices have on employee response to change.

When do job insecure employees adapt to change?

2019 ◽  
Vol 25 (3) ◽  
pp. 271-286 ◽  
Author(s):  
Kristi N. Lavigne ◽  
Victoria L. Whitaker ◽  
Dustin K. Jundt ◽  
Mindy K. Shoss
Keyword(s):  
Job Insecurity ◽  
Small Sample ◽  
Adaptive Performance ◽  
Work Behaviors ◽  
Content Type ◽  
Work Tasks ◽  
Main Effect ◽  
Low Levels ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to examine the relationship between job insecurity and adaptive performance (AP), contingent on changes to core work tasks, which we position as a situational cue to employees regarding important work behaviors. Design/methodology/approach Employees and their supervisors were invited to participate in the study. Supervisors were asked to provide ratings of employees’ AP and changes to core tasks; employees reported on job insecurity. Findings As predicted, changes to core tasks moderated the relationship between job insecurity and AP. Job insecurity was negatively related to AP for those experiencing low levels of change, but was not related to AP for those experiencing high levels of change. Counter to expectations, no main effect of job insecurity was found. Research limitations/implications This study employed a fairly small sample of workers from two organizations, which could limit generalizability. Practical implications The study identifies changes to core tasks as a boundary condition for the job insecurity–AP relationship. Findings suggest that organizations may not observe deleterious consequences of job insecurity on AP when changes to core tasks are high. Originality/value Few researchers have examined boundary conditions of the impact of job insecurity on AP. Furthermore, inconsistent findings regarding the link between job insecurity and AP have emerged. This study fills the gap and expands upon previous research by examining changes to core tasks as a condition under which job insecurity does not pose an issue for AP.

Racial dissimilarity and diversity climate effect organizational identification

2016 ◽  
Vol 35 (5/6) ◽  
pp. 314-327 ◽  
Author(s):  
Brooklyn Cole ◽  
Raymond J. Jones ◽  
Lisa M. Russell
Keyword(s):  
Organizational Identification ◽  
Turnover Intentions ◽  
Ordinary Least Squares ◽  
Important Variable ◽  
Hierarchical Regression ◽  
Diversity Climate ◽  
Climate Effect ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to empirically examine the relationship between psychological diversity climate (PDC) and organizational identification (OID) when influenced by racial dissimilarity between the subordinate and supervisor. Design/methodology/approach Ordinary least squares hierarchical regression analysis was run for hypotheses testing. Findings Three of the four hypothesized relationships were supported. Support was found for the direct relationship between PDC and OID. The moderator race was significant thus also supported. The moderator of dissimilarity was not supported. Finally the three-way interaction with race and dissimilarity was supported. Practical implications OID is an important variable for overall organizational success. OID influences a wealth of organizationally relevant outcomes including turnover intentions. Considering higher turnover exists for minority employees, understanding how diversity climate perceptions vary by employee race and therefore impact OID differently, helps managers when making decisions about various initiatives. Originality/value This study is the first the authors know of to investigate the impact of dissimilarity on the PDC-OID relationship.

The impact of executives’ perceptions of environmental threats and organizational slack on innovation strategies

2016 ◽  
Vol 7 (2) ◽  
pp. 216-230 ◽  
Author(s):  
Chengyuan Wang ◽  
Biao Luo ◽  
Yong Liu ◽  
Zhengyun Wei
Keyword(s):  
Cognitive Theory ◽  
Environmental Changes ◽  
Ordinary Least Squares ◽  
Organizational Slack ◽  
Least Squares Regression ◽  
Content Type ◽  
Environmental Threats ◽  
Innovation Strategies ◽  
The Impact ◽  
The Relationship

Purpose The paper aims to study the relationship between executives’ perceptions of environmental threats and innovation strategies and investigate the moderating effect of contextual factor (i.e. organizational slack) on such relations. It proposes a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies, in which different perceptions of environmental threats will lead to corresponding innovation strategies, and dyadic organizational slack can promote such processes. Design/methodology/approach The paper is based on a survey with 163 valid questionnaires, which were all completed by executives. Hierarchical ordinary least-squares regression analysis is used to test the hypotheses proposed in this paper. Findings The paper provides empirical insights about that executives tend to choose exploratory innovation when they perceive environmental changes as likely loss threats, yet adopt exploitative innovation when perceiving control-reducing threats. Furthermore, unabsorbed slack (e.g. financial redundancy) positively moderates both relationships, while absorbed slack (e.g. operational redundancy) merely positively influences the relationship between the perception of control-reducing threats and exploitative innovation. Originality/value The paper bridges the gap between organizational innovation and cognitive theory by proposing a dualistic relationship between executives’ perceptions of environmental threats and innovation strategies. The paper further enriches innovation studies by jointly considering both subjective and objective influence factors of innovation and argues that organizational slack can moderate such dualistic relationship.

Leader positive humor and organizational cynicism: LMX as a mediator

2014 ◽  
Vol 35 (4) ◽  
pp. 305-315 ◽  
Author(s):  
Panagiotis Gkorezis ◽  
Eugenia Petridou ◽  
Panteleimon Xanthiakos
Keyword(s):  
Mediating Effect ◽  
Hierarchical Regression ◽  
Public Employees ◽  
Cross Sectional ◽  
Content Type ◽  
Organizational Cynicism ◽  
Member Exchange ◽  
Sectional Analysis ◽  
The Impact ◽  
The Relationship

Purpose – Leader-member exchange (LMX) has been proposed as a core mechanism which accounts for the impact of various antecedents on employee outcomes. As such, the purpose of this paper is to examine the mediating effect of LMX regarding the relationship between leader positive humor and employees’ perceptions of organizational cynicism. Design/methodology/approach – Data were collected from 114 public employees. In order to examine the authors’ hypotheses hierarchical regression analysis was conducted. Findings – As hypothesized, results demonstrated that LMX mediates the relationship between leader positive humor and organizational cynicism. Research limitations/implications – Data were drawn from public employees and, therefore, this may constrain the generalizability of the results. Also, the cross-sectional analysis of the data cannot directly assess causality. Originality/value – This is the first empirical study to examine the mediating effect of LMX in the relationship between leader humor and employees’ perceptions of organizational cynicism.

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