scholarly journals Information asymmetry and conditional financial sector development

2017 ◽  
Vol 9 (4) ◽  
pp. 372-392
Author(s):  
Simplice Asongu ◽  
Jacinta Nwachukwu
Keyword(s):  
Information Asymmetry ◽  
Financial Development ◽  
Financial Sector ◽  
Policy Implications ◽  
African Countries ◽  
Content Type ◽  
Mean Values ◽  
Financial Sector Development ◽  
Negative Effect ◽  
The Impact

Purpose The purpose of this study is to examine the role of reducing information asymmetry (IA) on conditional financial sector development in 53 African countries for the period 2004-2011. Design/methodology/approach The empirical evidence is based on contemporary and non-contemporary quantile regressions. Instruments for reducing IA include public credit registries (PCRs) and private credit bureaus (PCBs). Hitherto unexplored dimensions of financial sector development are used, namely, financial sector dynamics of formalization, informalization, semi-formalization and non-formalization. Findings The following findings are established. First, the positive (negative) effect of information sharing offices (ISO) on formal (informal) financial development is consistent with theory. Second, ISOs consistently increase formal financial development, with the incidence of PCRs higher in terms of magnitude, and financial sector formalization, with the impact of PCBs higher for the most part. Third, only PCBs significantly decrease informal financial development and both ISOs decrease financial sector informalization. Policy implications are discussed. Originality/value The study assesses the effect of reducing IA on financial development when existing levels of it matter because current studies based on mean values of financial development provide blanket policy implications which are unlikely to be effective unless they are contingent on prevailing levels of financial development and tailored differently across countries with high, intermediate and low initial levels of financial development.

The Independence of Central Banks, Political Institutional Quality and Financial Sector Development in Africa

2020 ◽  
Vol 19 (2) ◽  
pp. 154-188
Author(s):  
Abel Mawuko Agoba ◽  
Joshua Yindenaba Abor ◽  
Kofi Achampong Osei ◽  
Jarjisu Sa-Aadu
Keyword(s):  
Financial Development ◽  
Political Institutions ◽  
Institutional Quality ◽  
Financial Sector ◽  
Developed Countries ◽  
African Countries ◽  
Jel Codes ◽  
Financial Sector Development ◽  
Legal Provisions ◽  
The Impact

Central Bank Independence (CBI) as a mechanism for achieving lower inflation and effective regulation and supervision of the financial sector should promote financial sector development. Though there is not much difference in CBI legal provisions, it seems to be more effective in developed countries than in African countries. There are suggestions that this could be due to differences in political institutional quality. Using panel data from 1970 to 2012, we find that CBI does not promote financial development in Africa. The impact of CBI is dependent on the level of development of a country. CBI promotes financial development more in countries with strong political institutions. JEL codes: E02; E44; E58

scholarly journals The Impact Of Inflation On Financial Sector Development: Experience From Zambia

2012 ◽  
Vol 28 (6) ◽  
pp. 1497 ◽  
Author(s):  
Nicholas M. Odhiambo
Keyword(s):  
Financial Development ◽  
Government Expenditure ◽  
Negative Relationship ◽  
Financial Sector ◽  
Bounds Testing ◽  
Financial Sector Development ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
The Impact

This study examines the impact of inflation on financial development in Zambia during the period between 1980 and 2011. The study attempts to answer two critical questions: 1) Is there a long-run relationship between inflation and financial sector development in Zambia? 2) Does inflation in Zambia have any negative effect on financial sector development? The study uses the recently developed ARDL-bounds testing approach to examine this linkage. In order to address the problem of omission of variable bias, the study incorporates other variables, such as government expenditure, trade volume and GDP per capita in the financial development model, alongside inflation thereby, creating a simple multivariate model. Using the domestic credit to the private sector as a proxy for financial development, the study finds that there is a long-run relationship between inflation and financial development in Zambia. The study also finds that there is a distinctively negative relationship between inflation and financial development. The results apply, irrespective of whether the model is estimated in the short run or in the long run.

scholarly journals DOES CORRUPTION SAND THE WHEELS OF FINANCIAL SECTOR DEVELOPMENT? EVIDENCE FROM GLOBAL PANEL DATA

2021 ◽  
Author(s):  
CHANDAN SHARMA
Keyword(s):  
Panel Data ◽  
Financial Development ◽  
Political Instability ◽  
Financial Sector ◽  
Income Group ◽  
Joint Effect ◽  
Dynamic Panel Data ◽  
Financial Sector Development ◽  
Negative Effect ◽  
The Impact

This study examines the effects of corruption and political instability and violence on the financial sector development. We estimate the impact for a panel of countries classified by income groups and regulatory quality. The study considers the period from 1996 to 2015 for analysis. The empirical models of this study test the linear as well as nonlinear relationships between corruption and financial sector development. Our analysis utilizes a dynamic panel data model and takes care of the potential endogeneity problem in estimation. The results show that corruption has a negative effect on financial sector development for all as well as different income-group countries. Our results further show that the effects of corruption are nonlinear in nature and indicate that corruption is more financial development-reducing when its level is very high. We also test the joint effect of corruption and political instability and violence on financial development. It largely shows that their combined effect is positive, implying that widespread corruption can positively affect financial development if a country is suffering from an unstable political institution.

Financial sector development and income inequality in South Africa

2017 ◽  
Vol 8 (4) ◽  
pp. 420-432 ◽  
Author(s):  
Forget Mingiri Kapingura
Keyword(s):  
South Africa ◽  
Income Inequality ◽  
Financial Development ◽  
Empirical Studies ◽  
Financial Sector ◽  
Financial Inclusion ◽  
External Trade ◽  
Bounds Testing ◽  
Content Type ◽  
Financial Sector Development

Purpose The purpose of this paper is to examine the relationship between financial sector development and inequality in South Africa for the period from 1990 to 2012. Unlike previous studies, the study examines the role of both the broad measure of financial sector development (Bank credit to the private sector) and a measure of financial inclusion (ATMs). Design/methodology/approach Utilising quarterly data, the autoregressive distributed lag bounds testing model approach to cointegration test was estimated. The approach was preferred due to its compatibility with data of different orders and flexibility. Findings The findings indicate that financial development, especially when it is inclusive reduces the level of inequality in South Africa both in the short- and long-run. The results also highlighted that economic growth, external trade activities and government activities have played a very important role in reducing inequality in South Africa. On the other hand the empirical results also highlight that increasing inflation is regressive on inequality in South Africa. Research limitations/implications The results from the study imply that financial development on its own though important may not benefit the disadvantaged groups such as the poor and the rural community until it is inclusive. It is important to note that the study was carried out on the premise that inequality plays a very important role in exacerbating poverty levels in South Africa. Practical implications The paper highlights another avenue which authorities can pursue to reduce the level of inequality in the country. Social implications The paper documents the importance of financial inclusion in reducing the level of inequality in South Africa rather than advocating for financial sector development only. Originality/value The paper makes a contribution through analysing the effect of financial inclusion on income inequality rather than broad financial sector development which is common to the majority of the available empirical studies.

scholarly journals Financial sector development convergence in Africa: Evidence from bank- and market-based measures

2019 ◽  
Vol 8 (4) ◽  
pp. 166 ◽  
Author(s):  
Yakubu Awudu Sare ◽  
Eric Evans Osei Opoku ◽  
Muazu Ibrahim ◽  
Isaac Koomson
Keyword(s):  
Financial Markets ◽  
Financial Development ◽  
Generalized Method Of Moments ◽  
Financial Sector ◽  
Developed Countries ◽  
African Countries ◽  
Development Indicators ◽  
Developed Economies ◽  
Financial Sector Development ◽  
Catch Up

In this paper, we employ data from 46 African countries over the period 1980–2014 to examine financial sector development convergence, using bank- and market-based measures of financial development. Within the framework of the generalized method of moments (GMM), we present evidence that both the bank– and market–based financial sector development in Africa diverge over time. However, we find strong evidence of financial development divergence when using bank-based financial sector development indicators whereas this evidence is weaker for market-based indicators. Given the divergence in the level of finance, the gap between countries with underdeveloped and well–developed financial markets will continue to widen as financially less developed countries do not appear to catch-up with the financially more developed economies.  Keywords: Financial development; divergence, convergence, AfricaJEL Classification: F15, F36, G01, O55

scholarly journals Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test

2017 ◽  
Vol 17 (3) ◽  
pp. 20170042 ◽  
Author(s):  
Brian Muyambiri ◽  
Nicholas Odhiambo
Keyword(s):  
South Africa ◽  
Causal Relationship ◽  
Granger Causality ◽  
Financial Development ◽  
Financial Sector ◽  
Policy Implications ◽  
Bounds Testing ◽  
Causality Test ◽  
Development Indicators ◽  
Financial Sector Development

This study investigates the causal relationship between financial development and investment in South Africa during the period from 1976 to 2014. The study incorporates both bank-based and market-based segments of financial sector development. In addition, composite indices for bank-based and market-based financial development indicators are used as explanatory variables. The study incorporates savings as an intermittent variable – thereby creating a simple trivariate Granger-causality model. Using the ARDL bounds testing approach to cointegration and the ECM-based Granger-causality test, the study finds a unidirectional causal flow from investment to financial development, but only in the short run. In the long run, the study fails to find any causal relationship between financial development and investment. These results apply irrespective of whether bank-based or market-based financial development is used as a proxy for financial sector development. The findings of this study have important policy implications.

Inflation and financial sector development in Sub-Saharan African countries

2019 ◽  
Vol 46 (4) ◽  
pp. 798-811 ◽  
Author(s):  
John Kagochi
Keyword(s):  
Financial Development ◽  
Good Governance ◽  
Trade Openness ◽  
Generalized Method Of Moments ◽  
Financial Sector ◽  
Content Type ◽  
Financial Sector Development ◽  
Sector Performance ◽  
Sub Saharan ◽  
Ssa Countries

Purpose The purpose of this paper is to examine the link between inflation and the financial sector performance in Sub-Saharan African (SSA) countries. Design/methodology/approach The study analyzes the relationship between inflation and the financial sector performance for selected 22 Sub-Saharan countries from 1980 to 2013. The study used panel data and the dynamic panel generalized method of moments econometric method. The study concentrates on the link between inflation and the development of the banking sector. Findings The findings suggest that inflation does not promote financial sector development in SSA region while trade openness has a positive impact on the selected financial development indicators. Other variables that enhance financial development in SSA include government expenditure and good governance. Practical implications The main policy implication of the study is that in order for SSA countries to benefit from a deeper and more active financial sectors, the rates of inflation must be maintained low and be consistently under control. Also, for SSA region financial sectors to become deeper and more active it is crucial to develop stronger economic institutions including independent central banks and sound fiscal authorities. Originality/value The study differs from previous studies as it includes more (22) countries from SSA region while previous studies were either regional or country specific. The study also incorporates trade openness and the role of institutional quality in enhancing financial development. This differentiates the study from previous studies on the subject from the region.

A sample survey analysis of the effectiveness of training and development initiatives in Bahrain’s financial sector on employability of Bahraini nationals in 2015

2016 ◽  
Vol 12 (4) ◽  
pp. 359-383 ◽  
Author(s):  
Subhadra Ganguli ◽  
Reem Hameed Matar
Keyword(s):  
Financial Services ◽  
Financial Sector ◽  
Training And Development ◽  
Policy Implications ◽  
Sample Survey ◽  
Content Type ◽  
Services Sector ◽  
Financial Services Sector ◽  
Development Initiatives ◽  
The Impact

Purpose Bahrain has been the center for financial services industry in the Middle East since 1970s as a result of the national strategy of diversification of its economy from oil-based resources to financial services. Since then Bahrain has also become the center for training and development for the Bahraini nationals with the aim of recruiting Bahrainis as employees of choice by the sector. The purpose of this paper is to analyze the effect of training and development initiatives on the employability of Bahrainis in the financial services sector in 2015. To this end, pioneering initiatives were undertaken by the government in creating institutions for training and continuous education in Bahrain. The Economic Vision 2030 of Bahrain lays emphasis on a vibrant private sector with Bahrainis being the employees of choice. Design/methodology/approach The study is a mixed approach using quantitative and qualitative methods through the use of a survey questionnaire and secondary data to analyze the impact of training and development on the employability of Bahraini nationals in the financial sector as of 2015. Findings The findings show that training and development lead to career progression which impact employability rates of Bahrainis in the financial services sector for the selected sample of financial sector employees. Research limitations/implications The study is limited by only a cross-section of data collected via questionnaire and does not consider the historical development and analysis of employability rates in Bahrain over the years. The questionnaire has some limitations and there are expected possible biases in the responses. Originality/value Given the sensitivity of the topic of research, the analysis has policy implications for the labor market of Bahrain due to the Bahrain 2030 Vision of privatization and diversification and is the first study of its kind for the financial sector of Bahrain.

scholarly journals The Impact of Inflation on Financial Sector Development: Evidence from Nigeria

2020 ◽  
Vol 12 (2) ◽  
pp. 56
Author(s):  
Afangideh U. J. ◽  
Garbobiya T. S. ◽  
Umar F. B. ◽  
Usman N.
Keyword(s):  
Financial Development ◽  
Significant Relationship ◽  
Financial Sector ◽  
Threshold Effects ◽  
Quarterly Data ◽  
Financial Sector Development ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive ◽  
The Impact

This paper examines the Impact of inflation on financial sector development in Nigeria using quarterly data from 2002-2017. Financial sector development is proxied using money supply as a share of GDP (M2/GDP).The Auto-Regressive Distributive lag (ARDL) model is employed to carry out the estimation given the weakness of the Engle-Granger residual-based cointegration technique to test the long-run and short-run effects of the impacts of inflation on financial sector development. The results of the estimation reveal that there is a positive and statistically significant relationship between inflation and financial sector development in Nigeria. There is need to test for threshold effects of inflation on financial development in Nigeria.

scholarly journals Institutional Quality and Financial Sector Development: Empirical Evidence from Nigeria

2018 ◽  
Vol 7 (1) ◽  
pp. 1 ◽  
Author(s):  
Fisayo Fagbemi ◽  
John Oluwasegun Ajibike
Keyword(s):  
Empirical Evidence ◽  
Financial Development ◽  
Good Governance ◽  
Developing Economies ◽  
Institutional Quality ◽  
Financial Sector ◽  
African Countries ◽  
Financial Sector Development ◽  
Long Run ◽  
Short Run

In view of the indispensable role of financial sector in both emerging and developing economies, there has been a notable spotlight on the financial sector development over the years in most African countries. Nonetheless, there are only a few studies on this topical issue, particularly for Nigeria. Hence, this study examines the long – run and short – run dynamic relationship between institutional quality and financial development in Nigeria over the period of 1984 – 2015 using Auto-Regressive Distributed Lag (ARDL) bounds test approach to cointegration. Using two different indicators (Private credit and M2) of financial development, the results consistently show that institutional factors do not have significant effect on financial development in the long – run as well as in the short – run. Furthermore, the empirical evidence indicates that regulatory quality and governance system (institutions) do not necessarily contribute to financial development in a feeble institutional environment, specifically in Nigeria. Thus, our findings suggest that whilst weak institutions could increase the risk of limiting the functioning of financial system, good governance and strong institutions are the essential ingredient of financial development in Nigeria. As a consequence, policies aimed at strengthening the quality of institutions and governance should form the major policy thrust of government (policy makers). These could help improving financial sector development in Nigeria.

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