A vibrant financial sector has a lot to offer towards the growth and development of an economy. It is in this regard that investor confidence matters most to the sector. Although the financial sector in the sub-Saharan African region is still growing, there are some crises in the sector that have made going concern an important matter for stakeholders. It is expected that, as often argued, corporate reporting and corporate governance can improve performance in order to boost investors’ confidence. However, the interrelationship between corporate reporting, corporate governance, going concern, and investor confidence has not been investigated yet in the sub-region for the fiancial sector. This study analysed the relationship among corporate reporting, corporate governance, going concern, and investor confidence for banks in the sub-region. Data were collected from published financial statements of selected financial banks in Ghana, Nigeria, and South Africa using data ranging from 2011 to 2020. The Partial Least Square Structural Equation Modeling (PLS-SEM) was used to analyse the data and it revealed that going concern relates positively to investor confidence. Also, corporate reporting and governance directly affect investor confidence. The implication is that management should enhance and disclose the corporate governance mechanisms of financial institutions in order to improve their ability to continue operations and increase investor confidence. 

Relationship among corporate reporting, corporate governance, going concern and investor confidence: Evidence from listed banks in sub Saharan Africa

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Financial Ratio and Stock Returns in Indonesia Equity Markets: A Signaling Theory Approach

The African farming sector suffers from insufficient finance. Climate changes and socio-political issues hold down the required production level while food on the continent is still inadequate, with more vulnerable people on the one side. On the other side, credit institutions need reasons and guarantees to raise their risk-taking level (financial benefits). Then, this study tries to conciliate those two sides with new shreds of evidence by demonstrating the short and long-run effects of agricultural production on bank sustainability in 40 Sub-Saharan African countries. The study used different agro-production factors (Food and Cereal production factors), bank stability proxies (Liquidity Ratio, NPLs, LLRs), and bank profitability proxies (ROA and ROE). The GMM, DFE, and FMOLS models were used for short (with the 2010-2019 dataset) and long-run analysis (with the 1970-2018 dataset). The results demonstrated that agricultural production increases bank stability and profitability but reduces bank risks. The study concludes that farming finance increases agro-production and stabilizes banks (win-win). Governments, via central banks, should encourage commercial banks to increase bank risk-taking levels to sustain their banking system, increase farming production, and improve food security.

The impact of African agriculture production on bank stability through bank risk and profit

The Sub-Saharan African region encounters a deficiency in agricultural financing, which can be attributed to its constraints in accessing international investments in general and the low engagement of bank risk-taking in particular. This situation leads to underproduction, which exacerbates poverty and malnutrition in the region. Thus, this study investigates the impact of the interaction effects between agricultural production, economic development (ED), and financial development (FD via FDI and DC) on bank stability ratios across 40 countries, encompassing 350 operational banks, during the period covering 2010 to 2019. The research employs the Generalized Method of Moments (GMM) technique and verifies its consistency with Two-Stage Least Squares (2SLS) and the Z-Score Approach. The results highlight two findings: first, the interaction effects between economic development, agricultural production, and financial development factors have significantly greater impacts on bank sustainability than their individual effects without interactions. Secondly, these interaction effects sustain significantly bank stability in two ways: on the one hand, they increase bank returns (through both ROE and ROA), while on the other hand, they reduce bank riskiness (via negative effects on NPL and positive effects on LLR). The study concludes that those interaction effects significantly sustain the stability of the African banking system. The SS African states (via their central banks) should promote farming finance services and enforce a minimum ratio of farming loans for each commercial bank’s credit portfolio as a solution to the investment deficiency in the sector. Hence, this can solve food production level issues, ensure food security, and effectively sustain both the banking system and real economic development.

https://journals.sagepub.com/doi/pdf/10.1177/21582440231181381

The Effects of the Interactions Between Agro-Production, Economic, and Financial Development on Bank Sustainability

The current literature on the finance-inequality nexus fall short of providing extensive evidence. This paper fills the gap by framing the financial sector; to the development of financial intermediation (supply side) and individual use of financial services (demand side). The first approach decouples the financial sector into the banking and stock market. We use the 5-year nonoverlapping averaged data from 1980 to 2017 across 49 countries and employ a panel data fixed effect and two-stage least squared estimation (2sls). We show that banking and stock market development widens income inequality. Besides, the effect is more prominent in countries that have a banking and stock market than countries only with the banking sector. The second approach uses financial inclusion and financial technology (Fintech) data from three waves of survey data in 2011, 2014 and 2017 on the individual use of financial services across 39 countries. We obtain three key findings. First, institutional quality significantly affects financial inclusion and Fintech. Second, Fintech positively affects inclusion and savings. Third, financial inclusion and Fintech exacerbate income inequality. Our result asserts a natural tendency that financial sector development exacerbate income inequality in Africa. 

Financial intermediation, inclusion, Fintech, and income inequality in Africa: Robust evidence from the supply and demand side data

PurposeThis research investigates the bond between stock market development and agricultural growth in African emerging economies from 1990 to 2020.Design/methodology/approachAgricultural value added to the gross domestic product measures agricultural growth and market capitalization and stock value traded measure stock market development.FindingsThe findings disclose that market capitalization negatively affects agricultural growth while stock value traded positively affects agricultural growth in the fully modified and dynamic ordinary least square techniques. The findings unveil bidirectional causality between labour and agricultural value added with unidirectional causality flow from agricultural value added to market capitalization and stock value traded.Research limitations/implicationsThe governments should promote agricultural growth initiatives which stimulate stock market development. Effective methods required to encourage credit flow to the agricultural enterprises through the stock markets' intermediation should be promoted using aggressive policies which eliminate credit flow bottlenecks. Policy makers and regulatory authorities should implement policies which attract investors to the agricultural sector and encourage companies' listing in the stock markets. The capital market funding should be expanded to boost economic growth through agricultural value added.Originality/valueLiterature reveals divergent results on the relationship between stock market development and agricultural growth. Earlier studies provide conflicting findings on the bond between stock market development and agricultural growth. Some findings indicate positive link between stock market development and agricultural growth, while others show a negative association. Studies' results reveal opposing directions of causality between stock market development and agricultural growth.

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Lionel Tembi Asah

Papers

Stock market development and agricultural growth of emerging economies in Africa