scholarly journals TRADE CREDIT POLICY: REVISITING TARGETING OF TRADE PAYABLES AND RECEIVABLES IN BRICS LISTED FIRMS

2020 ◽  
Vol 8 (3) ◽  
pp. 183-192
Author(s):  
Shame Mugova ◽  
◽  
Farai Kwenda ◽  
Keyword(s):  
Trade Credit ◽  
Generalized Method Of Moments ◽  
Financial Sector ◽  
Optimal Level ◽  
Dynamic Panel Data ◽  
Credit Policy ◽  
Financial Sector Development ◽  
Brics Countries ◽  
Additional Funding ◽  
The Difference

The study investigates if firms in BRICS countries pursue a target optimal level of trade credit policy. Trade payables levels may not always at the desired levels and firms take time to adjust from real to target levels. The level of financial sector development may influence firms’ speed and cost adjustment. Employing a dynamic panel data model estimated with the difference and system Generalized Method of Moments estimation techniques on a panel of 3353 listed BRICS non-financial firms, the study established that in pursuit of growth opportunities firms have a deliberate trade credit target levels. Firms pursue a target optimal level of trade payables and trade receivables and firm size affects creditworthiness and access to capital markets, which influences speed of adjustment from current to desired levels of trade payables. Investment in trade receivables require access to capital for additional funding and poorly developed financial sectors makes it costly to adjust towards optimal credit level. Different levels of financial sector development affect access to alternative sources capital which influences optimal trade credit policy.

scholarly journals Asymmetric targeting of corporate cash holdings and financial constraints in Pakistani firms

2019 ◽  
Vol 26 (1) ◽  
pp. 76-97
Author(s):  
Ghulam Ayehsa Siddiqua ◽  
Ajid ur Rehman ◽  
Shahzad Hussain
Keyword(s):  
High Speed ◽  
Financial Constraints ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Optimal Level ◽  
Dynamic Panel Data ◽  
Asymmetric Adjustment ◽  
Content Type ◽  
Listed Firms ◽  
Target Firms

Purpose The purpose of this paper is to investigate the asymmetric adjustment of cash holdings in Pakistani firms for above and below target firms. Design/methodology/approach The study employs generalized method of moments (GMM) to investigate the adjustment of cash holdings. Findings The study found that the firms which hold cash above the optimal level of cash holdings have higher speed of adjustment than the firms which hold cash below the optimal level. Financially constrained (FC) firms also adjust their cash holdings faster than financially unconstrained (FUC) firms but high speed of downward adjustment does not remain persistent after financial constraints are controlled. Findings of this study reveal this asymmetric adjustment in above and below target firms and extend these results in FC and FUC Pakistani listed firms, respectively. Research limitations/implications The conclusion of this study has been derived under certain limitations. There is a vast space to extend this study in different dimensions. Firms operating in capital-intensive industries may provide different results for financial constraints because their policy designing would be quite different from other firms. Originality/value This study contributes to cash holdings research in Pakistan by exploring the adjustment behavior of cash holdings across Pakistani non-financial firms using econometric modeling. Downward adjustment rate is supposed to be higher than upward adjustment rate and this rate is tested using dynamic panel data model. Similarly, it is inferred that this relationship holds for above target firms even after including the financial constraints in the presented model.

scholarly journals The Effect of Financial Sector Development on Economic Growth of Selected Sub-Saharan African Countries

2020 ◽  
Vol 23 (2) ◽  
Author(s):  
Dagim Tadesse Bekele ◽  
Adisu Abebaw Degu
Keyword(s):  
Economic Growth ◽  
Panel Data ◽  
Private Sector ◽  
Financial Institutions ◽  
Adult Population ◽  
Financial Sector ◽  
Dynamic Panel Data ◽  
Sub Saharan Africa ◽  
Financial Sector Development ◽  
Sub Saharan

Finance-growth nexus is among the main debatable issue in economics and policymaking. So, this research tried to look at the effect of financial sector development on the economic growth of 25 sub-Saharan Africa countries by using panel data for time 2010-2017. Precisely, three dynamic panel data models which look the effect of financial sector depth, access and efficiency on economic growth were estimated by two-step system GMM estimation. In this research, credit extended to the private sector per GDP, commercial bank branch per 100,000 adult population, and Return to assets were used as a proxy for financial sector depth, access, and efficiency, respectively. Accordingly, the results revealed financial sector depth, access, and efficiency have a positive and statistically significant effect on the economic growth of these countries.  It is therefore recommended for the concerned bodies that broadening the depth of financial institutions by giving more credit for the private sector is essential. Besides, the financial institutions will have to be expanded to increase their accessibility to the mass and have to take some measures which promote their efficiency. 

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 sector development & firm growth in BRICS countries

2017 ◽  
Vol 7 (4-1) ◽  
pp. 126-134
Author(s):  
Shame Mugova
Keyword(s):  
Firm Growth ◽  
Financial Sector ◽  
Productive Capacity ◽  
Growth Opportunities ◽  
Listed Firms ◽  
Speed Of Adjustment ◽  
External Finance ◽  
Financial Sector Development ◽  
Brics Countries ◽  
The Impact

The development of an economy’s financial sector facilitates improved access to capital. This study focuses on firm growth in terms of how much assets it controls and BRICS is chosen as the empirical medium of investigation. The impact financial sector development on firm growth amongst 3353 listed firms in BRICS countries is investigated using a GMM estimation technique. Firm’s investment in assets increases the organizational resources and productive capacity needed to achieve growth in the market. Financial sector development improves access to capital and firms with higher access to external finance pursue growth opportunities using debt. Financial sector development helps firms to adjust their capital structures quickly thereby minimizing the costs of staying off target. The speed of adjustment of firms towards their target capital structure facilitates financing of firm growth. The study found that listed firms in Brazil, Russia India, China and South Africa have a target total liabilities-to-total assets ratio and financial sector development helps firms to partially adjust towards target levels and pursue growth opportunities.

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.

Determinants of public–private partnerships: a state-level empirical analysis of India

2020 ◽  
Vol 38 (4) ◽  
pp. 597-611 ◽  
Author(s):  
Simrit Kaur ◽  
Sakshi Malik
Keyword(s):  
Negative Binomial ◽  
Generalized Method Of Moments ◽  
Institutional Quality ◽  
State Level ◽  
Negative Binomial Regression ◽  
Financial Sector ◽  
Public Private Partnerships ◽  
Content Type ◽  
Financial Sector Development ◽  
Physical Infrastructure

PurposeIn view of the significance of public–private partnerships (PPPs) as a tool for bridging infrastructure deficits, it becomes imperative to study its determinants. The objective of this paper is to empirically study the determinants of PPPs in India at a subnational level, in terms of both number and value of PPP projects.Design/methodology/approachThis study investigates the determinants of value and number of Indian PPPs at a subnational level for the period 2008–2017. The determinants are analyzed using two-step system generalized method of moments (GMM) and negative binomial regression. Select correlates examined are market size, fiscal compulsions, institutional quality, financial sector development and physical infrastructure.FindingsThe results indicate that fiscal compulsions, financial sector development and physical infrastructure influence PPPs favorably, whereas low institutional quality impacts PPPs adversely. A pertinent finding of this study is that the past value of PPPs lowers the current year's PPP value.Practical implicationsThe findings are expected to assist subnational governments and policymakers in formulating policies that attract more PPP projects (in terms of both value and number).Originality/valueThis is the first study that analyzes the determinants of infrastructure PPPs at a subnational level in India.

scholarly journals Corporate governance and credit financing in a developing economy

2017 ◽  
Vol 14 (4) ◽  
pp. 341-349
Author(s):  
Shame Mugova ◽  
Paul R. Sachs
Keyword(s):  
Corporate Governance ◽  
Emerging Markets ◽  
Trade Credit ◽  
Stock Exchange ◽  
Financial Sector ◽  
Bank Loans ◽  
Financial Sector Development ◽  
Governance Practices ◽  
Capital Financing ◽  
Credit Financing

Emerging markets have common weaknesses in their financial market development. Financial development is one institutional force that shapes financing and governance of firms in emerging markets. Debt and equity are alternative governance instruments. Trade credit is part of debt and therefore should be treated as such in corporate governance. We used a fixed effect regression of financial sector development and trade credit of firms listed on the Johannesburg Stock Exchange to ascertain the relationship of financial sector development and trade credit. We also analyzed the Socially Responsible Index (SRI) which measures corporate governance. We find that good corporate governance practices do not result in substituting of trade credit, despite its high implicit costs, with bank loans for working capital financing.

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.

Does openness enhance financial sector development? The experience of the Arab world

2014 ◽  
Vol 9 (3) ◽  
pp. 318-332 ◽  
Author(s):  
Nedal Al-Fayoumi ◽  
Bana Abuzayed
Keyword(s):  
Developing Countries ◽  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
Financial Sector ◽  
Arab Countries ◽  
Capital Account ◽  
Financial Openness ◽  
Content Type ◽  
Financial Sector Development ◽  
Openness To Trade

Purpose – The purpose of this paper is to examine if the simultaneous openness to trade and capital account can promote financial sector development. Design/methodology/approach – Based on a sample of 12 Arab countries over the period from 1985 to 2011, the data were analyzed using the dynamic and static panel data analysis. In particular, the authors apply three estimate techniques: the generalized method of moments, fixed effects and random effects. Findings – The empirical results do not support the simultaneous openness hypothesis. Even trade and financial openness have an important separate role in enhancing financial sector development; their interaction effect is harmful. This empirical evidence indicates that opening Arab countries to both trade and capital account will not necessarily promote financial sector development. Research limitations/implications – Some Arab countries are not included in the study sample because of the lack of data. Practical implications – The main implication of this study is: opening Arab countries for trade and capital account at the same time will not improve the development of financial sector. Social implications – The paper examines one of the most important issues in developing countries; where, the people want to know if the country openness to trade and finance will generate a social and economic welfare for them. Originality/value – This study can be considered as one of the rare studies that examine the simultaneous openness issue in the developing countries. It recommends regulators and policy makers to take gradual steps toward adopting trade and financial openness in the Arab countries.

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