African Finance Journal - latest Issue
Volumes & issues
Volume 18, Issue 2, 2016
Effects of financing and institutional constraints on capital structure of firms in select African countriesSource: African Finance Journal 18, pp 1 –44 (2016)More Less
We analyse the corporate capital structure of firms in seven select African economies, along the lines of firms' financing dependence. We particularly examine the relative importance of firm-specific and country-level institutional factors in firms'financing decision. Our results show that both firm-specific and country-level factors are important in firms' financing decision in Africa. However, despite African countries' notorious inadequacy of institutional infrastructure, firm-specific factors appear to be more directly influential on capital structure decisions than institutional factors, which mainly influence financing decisions in an intermediated way, via firm-specific variables. Moreover, effectiveness of 'investor rights and protection' is the only key institutional factor that influences firms' financing decisions both directly and indirectly. Overall, therefore, while firms focus on known firm-specific drivers of their capital structure, governments must work on provisioning important institutional variables, the lack of which could have unwelcomed effects on financing decisions, and by extension, the efficiency of production.
The nexus between foreign direct investment and foreign aid : an analysis of sub-Saharan African countriesSource: African Finance Journal 18, pp 45 –68 (2016)More Less
Funding constraints experienced by sub-Saharan Africa (SSA) countries have led to reliance on foreign direct investment (FDI) and foreign aid as alternative sources of finance. Despite the importance of FDI for growth and development, SSA's share in global FDI inflows trails that of other developing regions. This study examines the role of foreign aid in enhancing FDI inflows to 31 SSA countries from 1995-2012. Using multilevel analysis, the results suggest that productive infrastructure aid is complementary to FDI inflows and socio-economic infrastructure aid has no significant impact on FDI inflows. Additionally, the results indicate that oil producing countries that receive both productive sector and socioeconomic sector aid receive less FDI when compared to non-oil producing SSA countries.
Source: African Finance Journal 18, pp 69 –92 (2016)More Less
The study takes advantage of the introduction of Credit Referencing Bureaus (CRBs) in Ghana to provide evidence of the effects of information sharing, employing a Prais-Winsten panel estimation of 25 banks from 2006 to 2013. The study establishes that CRBs are negatively related to bank credit risk in Ghana. This implies that banks that use the services and products of CRBs in their operations are able to reduce their credit risk by reducing information asymmetry, which enhances banks predictive power on borrowers and also pressures borrowers to service their loans due to future denial of loan by banks. The study also found bank capital, size, loan concentration, gross domestic product growth rate and inflation rate to be significant determinants of bank credit risk. It is recommended that an expansion of the data source for CRBs and more publicity about CRBs presence in Ghana be embarked upon to improve the operations of both banks and CRBs.
The linkages between financial deepening, trade openness, and economic growth in the West African Economic and Monetary Union (WAEMU)Source: African Finance Journal 18, pp 93 –116 (2016)More Less
This paper examines the linkages between financial deepening, trade openness and economic growth in the West African Economic and Monetary Union (WAEMU). This is important because the literature on this crucial topic is scant in the case of WAEMU. The paper seeks to specifically examine whether by introducing trade openness into the finance-growth nexus, the causal direction will change. The paper uses a panel of eight (8) countries covering the period 1992 - 2009. It finds a distinct unidirectional causality flowing from financial deepening to economic growth via trade openness.