We investigate the relationship between leverage and the financial performance of listed firms in Kenya. We find strong evidence that leverage significantly, and negatively, affects firm profitability but does not affect firm value. Our results are robust to alternative panel specifications and firm size. Our results also suggest that asset tangibility, sales growth and firm size are important determinants of profitability. Surprisingly, asset tangibility consistently has a negative relationship with profitability. For small firms, we find that sales growth and firm size are important factors driving value. Yet, the same variables do not drive the value of large firms.
This paper draws implications from the 2010-2012 'Eurozone Crisis' for currency and proposed monetary unions in Sub-Saharan Africa (SSA). A wide variety of currency and monetary unions exist, or are proposed, including 'currency boards'.Most involve a potential mix of 'core' and 'periphery' countries without the prospect of prompt major trade gains. Most also mix net commodity exporters with net importers subject to asymmetric commodity price shocks. The experience of the Eurozone, with its well defined post crisis core and periphery countries, suggests that greater convergence and political and institutional preparation is required before a successful and fully fledged monetary union can be established.
This paper uses data on the four largest Regional Trade Agreements (RTAs) insub-Saharan Africa to argue that the dynamic form of the gravity equation is the appropriate model to estimate the effect of RTAs on intra-African trade. The paper also suggests a better approach to examining trade relationship between members of RTAs and nonmembers. The paper uses System Generalized Method of Moments estimator to overcome econometric issues associated with estimating dynamic models with persistent variables. The paper reports three important findings. First, a formal model selection test confirmed that the dynamic gravity model performs better than the static version. Second, the creation of COMESA and SADC has led to significant increase in trade among members. ECOWAS has increased intra-ECOWAS trade but in total has reduced intra-African trade. ECCAS has had a negative impact on both intra-ECCAS and extra-ECCAS bilateral trade flows. Third, our proposed approach to examining member-nonmember trade relationships provided the true estimates as compared to results from employing the usual approach in the literature.
This paper investigates the pass-through of the official interest rate to market interest rates in South Africa, using symmetric and asymmetric error correction modelling techniques and monthly interest rates data for the period 1980 to2007. The study found that the speed of adjustment of market interest rates is high, but differs across the rates. The highest speed occurs in the lending rate,followed by Treasury bill rate, money market rate and commercial bank deposit rate, while government bond yield shows the least speed. A test of commercial bank interest rates confirms asymmetric adjustment. Commercial banks are becoming increasingly competitive in the credit market, while the converse is true for the deposit market, where collusive behaviour among banks is evident.