African Finance Journal - Volume 7, Issue 1, January 2005

This study investigates empirically the role of financial development on economic growth in Tanzania. Unlike many previous studies, the study uses three proxies of financial development against real GDP per capita (a proxy for economic growth). Using the Johansen-Juselius cointegration method and vector error-correction mechanism, the empirical results of this study, taken together, reveal a bidirectional causality between financial development and economic growth in Tanzania - although a supply-leading response tends to predominate. When the ratio of broad money to GDP (M₂/GDP) is used, a distinct supply-leading response is found to prevail. However, when the ratio of currency to narrow definition of money (CC/M₁) and the ratio of bank claims on the private sector to GDP (DCP/GDP) are used, a bi-directional causality evidence seems to prevail. The study therefore recommends that the current financial development in Tanzania be developed further in order to make the economy more monetised.

This study presents evidence from the first decade of the Ghana Stock Exchange on the usefulness of fundamental accounting variables in predicting stock performance. Significant year-to-year relationships between individual variables and dividend adjusted annual returns were not prevalent, but significant positive stable relationships with returns were found for net profit margin and sales per share/share price, while there was a significant negative stable relationship between returns and beta. A combination of variables also significantly explained return variations. Given the exchange's short life, few listed companies, and high interest rates, the study highlights both the importance and limitations of accounting information in an emerging capital market.

This paper seeks to empirically identify the determinants of the capital structure of listed firms on the Ghana Stock Exchange during the most recent six-year period. Ordinary Least Square model is used to estimate the regression equation. The results indicate that, total debt constitutes more than half of the capital of listed firms in Ghana. The results also show positive associations between debt ratio (capital structure) and firm size and growth, while asset tangibility, risk, corporate tax and profitability are negatively related to debt ratio. The results generally support the pecking order theory proposed by the theoretical model.

The flying geese model, a theory of industrial development in latecomer economies is used to explore the prospects of South Africa playing the role of a leading 'goose' in the economic development of Africa. The model forms one theoretical framework that has been advanced to explain the economic growth of Asia as having been underpinned by the Japanese economy (Asia's leading goose). South Africa's experience of import substitution during the period of apartheid and international isolation resulted in the achievement of self-sufficiency in particular sectors of the economy, including food, textile, financial services etc. After 1994 following the first democratic elections, the focus of the government shifted to export promotion and capital account liberalization, which resulted in substantial involvement of South African corporations in the rest of Africa. It is against this background that this paper presents anecdotal evidence on the prospects for South Africa of acting as a regional growth pole and perhaps replicating the flying geese model.