Showing papers by "Joshua Abor published in 2012"

FDI and economic activity in Africa: The role of local financial markets

Abstract: This article examines the role local financial markets play in the link between foreign direct investment (FDI) and economic activity. The article uses panel data methods on 32 African countries over the period 1997 to 2008. Our results show that FDI only has a significant effect on economic activity when interacted with financial market variables, namely, private-sector credit and savings. The results of this study imply that FDI is more productive in the presence of well-functioning local financial markets. African governments must therefore pay particular attention to developing further local financial markets to ensure full economic benefits of FDI inflows. © 2012 Wiley Periodicals, Inc.

Enhancing the Economic Growth of Africa: Does Banking Sector Efficiency Matter?

Abstract: Purpose – The purpose of this paper is to examine the relationship between banking sector efficiency and economic growth in Africa. Methodology/approach – The paper used the stochastic frontier approach stating the banking sector cost function as a Fourier flexible to estimate bank efficiency. We then used the Arellano–Bond GMM estimator to investigate the relationship between banking sector efficiency and economic growth. Annual data for banking sector financial statements were used in estimating efficiency scores. Findings – The study found banking sector efficiency in the sample to be 69%. We also found a positive relationship between banking sector efficiency and economic growth, confirming the critical role banks play in the economy. Practical implications – Banking sector efficiency score of 69% implies banks in Africa could save up to 31% of their total cost if they were to operate efficiently. Policy direction should therefore focus on policies and incentives that will improve the efficiency of the banking sector and hence economic growth. The study brings to the fore the importance of the qualitative aspect of the banking sector in allocating financial resources in the real economy. Focus in the real economy should not be only on the size of the banking system but also on the quality with which resources are allocated. Originality/value of paper – This study is among the first dedicated solely to African countries. It does set the pace for future research in the area and also confirms in Africa the Schumpeterian hypothesis that the banking sector is key in allocating resources in the real economy.

Non‐bank financial institutions regulation and risk‐taking

Abstract: Purpose – The purpose of this study is to examine the relationship between regulation of non‐bank financial institutions and their risk‐taking behaviours in GhanaDesign/methodology/approach – The analysis is performed using data derived from the Bank of Ghana Database during a five‐year period, 2006‐2010 Correlated Panels Corrected Standard Errors model is used to estimate the regression equation Capital adequacy requirements and the restrictions on non‐bank financial institutions' (NBFIs') ability to take deposits are used as proxies for regulatory pressure The study also used the ratio of risks weighted assets‐to‐total assets, the ratio of non‐performing loans‐to‐net loans and the Z‐scores of NBFIs as measures of riskFindings – The results of the study show a negative relationship between minimum capital adequacy requirement and the risks weighted assets of NBFIs This indicates that, asking NBFIs to keep higher minimum capital adequacy ratio results in reducing their risk‐taking The results also

How do we explain corporate board structure in sub–Saharan Africa?

Abstract: This study examines the determinants of corporate board structure in selected sub–Saharan Africa. We specifically investigate which firm–level characteristics exhibit any link whatsoever with board size, board composition and board leadership structure in Ghana, Nigeria, Kenya and South Africa. We also ascertain whether alternative governance mechanisms such as institutional shareholders and debt holders serve as substitutes in addressing the agency conflicts in firms. The findings of the study indicate that institutional ownership is an alternative governance mechanism for board size for a majority of the countries under study. The findings of this study also indicate that firm size is the only variable that significantly and positively explains board size for all the four countries under study and the other firm–level characteristics, though significant in some cases in explaining the board structure, take on different signs from country to country and for different board characteristics.

Assessing Competitive Behaviour in Emerging Banking Market: African Evidence

Abstract: Originality/value – This paper provides useful information relevant to policy makers in the banking sector about the nature of bank competitive behaviour in Africa and the drivers behind the competitive behaviour.