Using a panel of listed firms in Ghana, Kenya, Nigeria, South Africa and Zimbabwe, we investigate corporate capital structure in Africa, with emphasis on the extent to which firm characteristics and cross-country institutional differences determine the way firms raise capital. Results indicate that firms in Africa are about as leveraged as firms in emerging economies such as Mexico, Thailand, Brazil, South Korea, Malaysia and Turkey. African firms tend to rely heavily on internal finance, and where they use external finance, they choose mostly short-term debt to fund their production activity - indicating some support for the pecking-order postulate. Moreover, firms' profitability, size, asset tangibility and age, relate significantly to leverage; thus suggesting that remedies for inadequate institutional infrastructures are important determinants of corporate capital structure in Africa.
This paper analyses the effects of financial policy on corporate performance of emerging market firms. Using capital structure and dividend payout as measures of financial policy, we employ fixed effects panel model in our estimation. The results indicate that capital structure has negative effects on return on assets and return on equity but is positively related with market-to-book value ratio. Dividend payout is also positively related with return on assets and return on equity. We also document that macro-level factors such as stock market development and GDP per capita are relevant in explaining corporate financial performance.
This paper examined equity market integration within the emerging and frontier stock markets of south and east Africa, and the rest of the world. Using maximum likelihood based cointegration we showed that there are weak stochastic trends between African markets and world markets. With the exception of South Africa and Mauritius, African markets are not integrated regionally either. However, analysis of the short run dynamics indicates that size and extent of financial market development drives equity market interdependence, with South Africa accounting for most of the innovations to and, from global markets. Importantly, our results indicate that while diversification potential exists in Africa's emerging exchanges, the scope of deepening the structural relations both regionally, and with the rest of the world should be of concern to policy makers.
The FDI-growth nexus in developing countries has been of tremendous interest to a number of researchers. The inconclusive debate on the relationship between foreign direct investment (FDI) and economic growth has continued to inspire this interest. In Nigeria, the sustainability of the FDI-growth relationship is of utmost concern in the development discuss. This study employs the Johansen cointegration framework and the vector error correction technique to shed more light on the problem. The empirical results show that a long-run equilibrium relationship exists between economic growth and FDI inflows. The study also revealed a unidirectional causality from FDI to economic growth.