Effect of Recent Global Financial Crisis on South Asian Economy with Special Reference to India

Most of the Asian countries were affected adversely for the recent global financial crisis, especially those economies whose growths are largely depended on the external trade. It has been observed over time and again that Indian economy has not been significantly harmed by the waves of global financial and economic crises because of its large domestic market, which can accommodate any external shock. During the phase of shrinking world demand of domestic goods and services, efforts to raise productivity and competitiveness helps countries to protect export market. This chapter investigates the dependence on the external market and the effect of global financial crisis on the trade structure of some Asian countries. Some detail studies will be done for India in respect of compositional changes and productivity and efficiency changes of different industries within manufacturing sector during pre and post crisis period. Efficiency and productivity will be analyzed using frontier model.

Corporate Governance and Firm Performance

Ownership structure is considered to be of prime importance in corporate governance of a firm. The ownership structure significantly varies across the nations. The main focus of this chapter is twofold: firstly to see the impact of ownership structure on performance of the firm and secondly to investigate the relationship between stock market performance and ownership structure during the crisis period. Panel data analysis of CNX 200 companies has been done for the time period of 2006-2013.The study also takes into account the relationship between crisis period stock return and ownership structure. The results of this study reveal a positive relationship of promoter's shareholding with performance while a negative relationship of performance is found with the non-promoters shareholding. The regression of stock price performance on ownership variable gives a significant negative relationship during the crisis period.

Dimensions of Good Governance

Effectiveness of governance is realised through its responses to any financial crisis. This was put in question as the Great Recession affected the core economies severely. This study empirically investigated the relationship between accountability, corruption, and government effectiveness during the period 2002-2012. Our main purpose was to highlight the sizable gap that exists in the performance literature on cross-country studies especially against the changing economic world scenario. A comparison of the World Bank governance indicators between three countries chosen on the basis of income differentials and hence different adaptive characteristics of each country to the economic recession has been studied. The behavior of the governance indicators in the context of the world has been examined against the background of the shock that the depression had brought and the resilience factors embedded within the indicators in the face of the shocks were studied.

Sustaining Governance

This chapter has three core aims. First, to discuss the concepts of governance and leadership while drawing upon key literatures and qualitative data to make sense of the factors that can enable leadership to sustain governance systems. Second, the chapter explores the practice of leadership at the Greater London Authority (GLA) level in the United Kingdom (UK) in order to establish features synonymous with the practice of leadership. Third, the relations between governance and leadership are explored so as to better understand how the latter is employed in sustaining the governance process at the GLA level in the UK.

Business Investment and the Nigerian Investible Capital Haemorrhage in Financial Crises

The global financial crises that happened between 2007 and 2010 had deleterious effects on countries across the world including Nigeria with regard to their respective levels of globalisation. This was evidenced with sudden outflows of capital emanating from the capital market that impacted negatively on the banking system. The chapter has adopted a number of variables among which are investment and net portfolio investments and external reserves. The main technique used is the regression (both single and two-stage) the results of which indicate that the investment was not negatively impacted by the portfolio investment but had significantly negative effect on the external reserve and the saving of the country. The chapter recommends a better control of the capital out flows and improvement in the business environment to reduce the capital haemorrhage faced by the Nigerian economy.

Corruption, Size of Government, and Economic Growth

A big size government fosters corruption, which can lead to inefficiencies and resource costs that impede economic progress. In this chapter, it is argued that much of the previous studies have focused only on detecting the linear effects of corruption on growth. This study, therefore adopts the Threshold Autoregression (TAR) approach by using an annual panel data of 100 countries during 1990-2012 to evaluate any existence of a non-linear relationship. This study presents evidence that suggests the existence of a hump shaped (nonlinear) relationship between corruption and long-run economic growth. When the government size is small (11.518%), corruption positively affects economic growth. Whereas, when the government final consumption expenditure (% of GDP) is larger than 19.027%, corruption negatively affects economic growth. Furthermore, the result indicates that a non-linear relationship of the ‘Armey curve' exists in our panel of countries. Thus, a government should investigate whether government size is over-expanding or not when designing its public finance policy.

Impact of Microfinance on Poverty in the Context of Global Financial Crisis

The microfinance programme in the South Asia region has proven to be resilient to the shocks of global financial crisis. In fact, cross country experiences in South Asia reveal little impact of the global financial crisis on the penetration of the microfinance programmes to poor households. To explore the impact of microfinance on poverty in the backdrop of global financial crisis, an attempt has been made in this present study to examine the relationship between MFI's gross portfolio per active borrower and the measures of poverty. Empirical evidences based on Pooled Regression Analysis suggest that gross portfolio per active borrower is negatively and significantly associated with the poverty head count ratio or poverty gap measure, which is consistent with the author's hypothesis that micro loans reduce poverty. The poverty alleviation role of microfinance in South Asian countries is not changing its dynamics even in post-crisis scenario.

Factors Determining Foreign Direct Investment Inflow to Nigeria during Pre-Financial Crisis

This chapter empirically investigates the determinants of foreign direct investment (FDI) to Nigeria during pre-financial crisis period 1970-2006. This study suggests that the endowment of natural resources, trade intensity, macroeconomic risk factors like inflation and exchange rates are significant determinants of FDI flow to Nigeria. The findings also suggest that in long run market size is not the significant factor for attracting FDI to Nigeria, it contradicts the existing literature. The author's results indicate that FDI flow to Nigeria is resource-seeking FDI. Results also suggest that trading partner like the UK in North-South (N - S) and China in South-South (S - S) trade relation have strong influence on Nigeria's natural resource outflow.

Market Fundamentals and Stock Pricing in Nigeria

This chapter investigates the relationship between stock pricing and behaviour of the stock market on one hand and micro and macroeconomic fundamentals in the Nigerian economy on the other from 1980-2009 using both primary and secondary data. Results from the primary survey indicate that the key drivers of share prices were neither broad macroeconomic indicators nor key indicators of the health of the firm. Prices were clearly shown to be much above levels that could have been determined by such indicators as posted profits of firms, amounts paid out as dividend and its regularity. Secondary data analysis equally show that the relationship between actual levels of the all share price index for the period of our analysis and during the financial crisis were not driven by “expected” variables. While its fundamental values are driven by monetary and relative price variables, actual values are driven by external sector variables and prices.

Post Crisis Performance and Confidence of the Indian Economy

The recent global financial crisis is viewed as a glaring example of limitless pursuit of deregulation of financial markets and failure of global corporate governance. Though the global economic slowdown had its epicenter in the US but its impact is being witnessed in all major economies of the world. The present chapter seeks to analyze the post crisis experience of the Indian economy as compared to the global economic performances, using various macroeconomic indicators as output, employment, inflation, current account balance, movement in real effective exchange rate and inflow of FDI. It is based on a statistical analysis using secondary time-series data and is based on the Exogenous Structural Break Model developed by Perron (1989). Finally it tries to highlight the confidence of the economic agents based on some well recognized confidence indices (for e.g. Business Confidence Index, Consumer Confidence Index, FDI Confidence Index etc.) during the post-crisis period.