Most empirical research on contagion in financial markets neglects smaller, frontier markets like those found in Africa. In this paper, contagion is measured on sector-by-sector basis for six African equity markets. Although evidence of contagion is present in both the Asian and Russian crises, contagion is not found to be widespread in African markets. Egypt and South Africa, two of the largest and oldest markets in Africa, show the most signs of contagion, although only in a minority of sectors. Comparing these sector level results with market level analysis provides insight into the sectors that influence the market level findings.
This paper examines the relevance of McKinnon's complementarity hypothesis in Tanzania using the Johansen-Juselius cointegration method and error-correction model. The study was motivated by the current controversy over the positive role of financial liberalisation on savings, financial deepening, investment efficiency and economic growth. Contrary to the results obtained from some previous studies, the empirical results of this study reveal a strong support for the complementarity between money and physical capital in Tanzania. This applies irrespective of whether the model is estimated in a static long-run formulation (cointegration model) or in the dynamic formulation (error-correction model).
We examine risk-adjusted returns in association with (i) bids coinciding with toehold acquisitions and (ii) bids that are deferred past the toehold acquisition date. When a bidder is uncertain about the merged value of the target company, buying a toehold and deferring a bid can be more beneficial than immediately proceeding to full control. For target firms, abnormal returns around toehold acquisitions are found to anticipate deferred bids, irrespective of the status of rival bidders. Bidders experience zero abnormal returns around toehold announcements irrespective of the status of rivals, as expected. A new finding is that bidder returns average negative (-5.3%) around bid announcements, and are traced to a sub-sample of bidders who deferred their bids and bid at a price below that paid for their toehold. The negative return is interpreted as market correction of the value attributed to earlier toehold acquisitions when there was less information about the merged value of target companies.
One of the factors associated with poor performance of the manufacturing sector in Tanzania is limited financial sources. This suggests that manufacturers need to make proper investment decisions. Several studies have associated the performance of manufacturing firms with investment without considering the structure of investment and controlling for the effects of other firm resources. Thus, this paper examines the relationship between competitiveness and investment decisions while controlling for other firm resources. The results reveal that competitiveness is significantly and positively associated with investment decisions. Investment in production equipment raises competitiveness while investment in land and building decreases it. The strength and direction of the relationship are sector specific.