Showing papers in "Global Business and Economics Review in 2018"

Financial sector development and income inequality in ASEAN-5 countries: does financial Kuznets curve exists?

Abstract: This study investigates the influence of financial sector development on income inequality in ASEAN-5 countries, namely Indonesia, Malaysia, the Philippines, Singapore and Thailand between 1989 and 2013. We have constructed the financial development index for the selected ASEAN countries by applying the principle component method for the major four proxies of financial development available in literature, namely; domestic credit by the banking sector, domestic credit to the private sector, money supply and stock market capitalisation. Pedroni panel cointegration and Kao residual panel cointegration approaches confirm the valid long run relationship between considered variables. Results of fixed-effect model indicate that the different proxies of financial development have a positive and significant impact on income inequality in ASEAN-5 countries, while the squared term of financial development proxies have a negative and significant impact on income inequality. These findings confirm the presence of financial Kuznets hypothesis in ASEAN-5 countries during the period under the study.

Optimal tax revenues and economic growth in transition economies: a threshold regression approach

Abstract: The purpose of this article is to explore the impact of tax revenue as a share of GDP on economic growth in transition economies. The article uses a dynamic panel threshold model to examine the nonlinear relationship between tax revenue and economic growth of 11 central and south-eastern European and Baltic countries during the transition process between 1995 and 2014. The results suggest that the optimal level of tax revenue for maximising economic growth is approximately 18.00% of GDP for full transition economies, 18.50% for developing economies and 23.00% for developed economies. The findings indicate that tax revenues as a share of GDP above the threshold level adversely affect economic growth whereas a tax revenue rate below the threshold positively affects growth. The results of the current study reveal that tax sizes representing the share of the government in the economy have an optimal level.

Conceptualising the effect of brand love on consumers' repurchase intentions for consumer products

Abstract: This conceptual paper discusses the theoretical intricacies of the relationship between brand love and consumers' repurchase intention. Consumer emotions towards brands, such as love and likeability, are seen as pivotal to longer-term consumer-brand relationships. Some marketing research advances the potential for brand love to generate positive consumer emotions towards a brand, such as consumer gratitude, directly impacting consumer repurchase intentions and, ultimately, improved business performance. However, there is research alerting for possible negative effects on consumers from building strong emotions, such that the implementation of brand love strategies by business must be exercised with caution and requires deep understanding of the concept. Are brand love and brand likeability distinct concepts with distinct effects on repurchases intentions? Considering types of products differentiated by their search, experience and credence qualities, a framework is developed to examine the relationship between brand likeability, brand love, and their relative effect on consumer repurchase intention. Attention is also given to consumer gratitude as a moderator of the effects of brand love on repurchase intentions.

Impact of firm specific and macroeconomic factors on financial performance of the UAE insurance sector

Abstract: This study analyses the impact of firm specific and macroeconomic factors on the profitability of the insurance sector in UAE during the period of 2009–2013. In the recent past, the global insurance sector was impacted by the ripple effect of the financial crisis of 2007-2008. Along the lines of the global trend, although profitability of the UAE, insurance sector witnessed a decline from 2008–2010, the spur in its growth rates (10%) in 2012 and 2013 is impressive compared to the negative growth rate in developed markets. Our research contributes to the existing body of knowledge on financial performance of the insurance sector post the global financial crisis. Our results indicate that within the firm specific factors; company size, growth in gross written premium (GWP), leverage, investment ratio and market share are statistically significant in explaining profitability of the insurance companies. Further, GDP growth has a significant positive influence on profitability.

Internal CSR practices within the SME sector in Cyprus from the employees' perspective - challenges and prospects

Abstract: This paper examines the results of a recent study into four domains of internal corporate social responsibility (CSR) practices within small and medium-sized companies in Cyprus from the employees' perspective. This perspective gives an added insight into the developing CSR practices in Cyprus, revealing interesting findings about the sufficiency (or not) of current practices. Looking into the results of the study, as well as into a number of policy initiatives considered in the relevant national action plan on CSR, we seek to draw some conclusions on the prospects for further developing internal CSR practices across SMEs. We argue that a more active policy framework is needed. Considering the very small size of most Cypriot companies, current, or foreseen, legal requirements relevant to CSR do not apply to the majority of Cypriot businesses. This very fact raises a particular challenge for the development of CSR practices on the island. In light of this, we argue that voluntary CSR initiatives remain of primary importance, yet these should be developed within a broader framework which promotes cooperation between the various stakeholders.

Foreign divestment in the integration development path of Greece

Abstract: Research on investment development path (IDP) primarily focuses on conventional FDI. Instead, our study extends the IDP to explore foreign divestment within the European integration process approaching foreign divestment risk as the outcome of an interaction between regional integration and economic development. This is the main contribution of the study. In particular, the paper explores divestment risk when the emerging economy of Greece enters the single market which is considered as a crucial turning point for its development path. The analysis focuses on the divestment outcome of 162 MNE subsidiaries established during the protectionism era and finds considerable manufacturing divestment during the transition from protectionism to regional integration in spite of the positive development of the Greek economy. However, the divestment effects of the individual explanatory variables used in the study are asymmetrical. The findings provide useful lessons for economic policy in emerging economies entering a developed integrated area, having interesting integration and FDI policy implications and venues for future research.

The global financial crisis and stock price behaviour: time evidence from Nigeria

Abstract: Extensive research was conducted on the effect of the global financial crisis on stock markets across the globe, but only a limited number focused attention on African stock markets. This study examined the impact of the global financial crisis on emerging stock market behaviour by providing evidence of the efficiency and volatility of the Nigerian stock market across different time periods. The period under review ranges between July 2004 and December 2014. It was sub-divided into the period before the crisis (July 2004–June 2007), the crisis period (July 2007–November 2011), and the period after the crisis (December 2011–December 2014). The generalised ARCH (GARCH) model was built to test for persistence of volatility shocks in the sub-sample periods, while an exponential GARCH (EGARCH) model was developed to determine asymmetry and persistence of volatility in the overall period. The study showed that price is a martingale in all sub-sample periods, except for the pre-crisis period. However, in the overall period, price is not a martingale – suggesting that the Nigerian stock market is not weak form efficient. In addition, there was evidence of long-term persistence in price volatility in the crisis, aftermath and overall periods. Holistically, this study found that the global financial crisis reduced stock prices, but did not have a significant impact on price volatility in the Nigerian stock market.

Institutional and macroeconomic determinants of financial development in the OIC countries

Abstract: The role of financial development to the growth process is recognised in the literature and policy cycles, therefore, what determines it is also worthy of attention. This study investigates the institutional and macroeconomic determinants of financial development in 50 OIC member countries from 2003 to 2011. Dynamic panel approach-system-GMM is employed. The results revealed that overall level of income positively influences financial development, and exchange rate encourages financial depth and lending activities. Financial openness is found to promote financial depth only, while institutional quality promotes lending activities. On the other hand, inflation stimulates bank private credit and reduces the depth of the financial sector. This mixed results implied that, policy makers in the OIC countries, shall adopt a hybrid of economic and financial policies as well as implement political, legal and governance reforms in order to enhance financial development and hence promote economic growth.

A model for testing the relationship between company’s size and performance: a cross country analysis

Abstract: The purpose is to verify whether the company's size (in terms of production value) could be considered as a relevant factor in impacting company performance, taking into consideration the country variable. Italian and German companies have been compared. The country factor (considering its structural and economic characteristics that are different from the company's size) has a primary importance in determining the differences of performance between German and Italian companies. There is a weak relationship between the companies' performance and their size. Size factor is not one of the main factors that explain why the performance of the German companies is better than Italian ones. Global differences are mainly due to the structural and economic characteristics of each country and, in residual form, due to different size of the companies operating in those two countries. The research is characterised by several theoretical and practical implications, especially for top management and investors.

Utilisation of emotional intelligence in the retail banking sector - a preliminary model for Lebanon

Abstract: Emotional intelligence (EI) has been the subject of much controversy over the years consequent to its significance and widespread utilisation in business, as well as due to the ways it has been defined and labelled since the 19th century. Given the fact that emotional intelligence can have a major impact on the retail banking sector, a culturally-driven perspective is deemed significant, especially in the context of Lebanon - a market that appears to fit no existing model of emotional intelligence. Thus, the aim of this research is to create a preliminary model of emotional intelligence that fits the Lebanese retail banking sector (LRBS), through a combination of existing models, interviews, theoretical research and secondary data. The research findings have identified and inter-related Lebanese-specific cultural variables to be further empirically researched towards an evaluation of their significance regarding individuals' EI. The research further developed a preliminary model of EI for the LRBS, comprising general variables, Lebanese-specific variables, and EI skills. The value of the research stems from its contribution to knowledge on the role and significance of EI in the LRBS, as well as from its setting of the foundation for future research that will refine, test and finalise this model.

Multifactor analysis of online reputation as a tool for enhancing competitiveness of selected tourism entities

Abstract: The paper discusses the issue of online reputation, more specifically the ways and methods of its measurements in selected entities operating in the tourism sector. A multifactor analysis of reputation in the virtual world of the internet was conducted on a specific sample of entities – 17 hotels operating in a selected local destination. Taking into account all the relevant factors – entities ratings on major internet sites such as Google, Booking, TripAdvisor and Facebook, these ratings are normalised and compared against the widespread sentiment analysis, which provides a relevant perspective on a selected entity through the eyes of a model customer – internet user. By using a statistical testing, relationships between factors are examined in order to identify and describe basic facts affecting online reputation of selected entities, in the hyper competitive market environment of the internet. The findings identified by the analysis conducted on the local market can be used in any market for the purpose of increasing competitiveness of selected tourism entities.

Modelling and forecasting volatility of the Botswana and Namibia stock market returns: evidence using GARCH models with different distribution densities

Abstract: This paper estimates and compares alternative distribution density forecast methodology of three generalised autoregressive conditional heteroscedasticity (GARCH) models for Botswana and Namibia stock market returns. The symmetric GARCH and asymmetric Glosten Jagannathan and Runkle (GJR) version of GARCH (GJR-GARCH) and exponential GARCH methodology are employed to investigate the effect of stock return volatility in both stock markets using Gaussian, Student-t and generalised error distribution densities. The evidence reveals that the current shocks to the conditional variance will have less impact on future volatility in both markets. News impact is asymmetric in both stock markets leading to the existence of leverage effect in stock returns. Besides, both markets exhibit reverse volatility asymmetry, contradicting the widely accepted theory of volatility asymmetry. Regarding forecasting evaluation, the results reveal that the symmetric GARCH model coupled with fatter-tail distributions present a better out-of-sample forecast for both stock markets.

Determinants of external financial flows to the Southern African development community region: an empirical study

Abstract: The study examines the determinants of three forms of foreign capital, cross-border bank flows (CBF), foreign direct investment (FDI) and oversees development assistance (ODA) in the SADC region over a period from 1980 to 2012 utilising the 3SLS model and the GMM. The empirical results reveal that both domestic and foreign factors are important determinants of private external financial flows (FDI and CBF) to the SADC region. In all the regressions estimated in the study, foreign variables emerged to be significant in influencing the flow of finance to the region. This suggests that events in developed countries can reduce the amount of external financial flows to the developing countries. Thus, relying on foreign capital flows may humper growth prospects in the SADC countries. This therefore suggests that mobilisation of domestic resources can be an avenue worth exploring to enable sustainable long-term growth in the region.

Determinants of technological and no-technological innovation in SMEs: the case of Crete

Abstract: The purpose of this study is to investigate the drivers of both technological and non-technological innovation on evidence from a sample of manufacturing SMEs in the region of Crete (Greece) during a period of economic turbulence. Using probit models the drivers of innovation, both technological and non-technological, are examined. The empirical results of the study indicate that SMEs' innovation activity is driven primarily by firm-specific features such as marketing, financial performance, exporting activity and R&D. The contribution of this study rests on the investigation of determinants for both technological and no-technological innovation in contrast to the majority of published research that focuses primarily on technological innovation. In addition, to the extent that innovation is unanimously, considered significant for firms' overall performance, findings of the study provide implications for practitioners, managers and policy makers to become appropriately equipped for addressing the challenges of the unstable market environment that enterprises operate in.

Evaluating the effects of cultural and psychic distance on multinational corporate performance: a meta-analysis

Abstract: The conceptual and empirical relationship between cultural and psychic distance (CD&PD) and multinational enterprises' (MNE) performance is a subject that still remains considerably underexplored. Regardless of the large number of studies, previous studies have delivered a mixed bag of results. Although previous meta-analyses have analysed the overall relationship as presented in the literature, they did not produce in-depth investigations of the moderators of the relationship. In this paper, we claim that it is this lack of moderators which is the potential source of inconsistency in literature findings. Using a sample of 56 articles, the meta-analysis results indicate that different variables advocate a different relationship between CD&PD and multinational enterprises' performance, thus confirming the vast number of moderators for the relationship as well as their crucial role. The most important sources of inconsistency identified from the analysis are the different measures used to capture the CD&PD and multinational enterprises' performance.

An analysis of different Brexit outcomes and their effect on inward FDI to the UK

Abstract: In June 2016, the UK voted to leave the EU, and the economic implications of 'Brexit' are starting to take on a clearer focus. This paper seeks to outline the patterns of inward FDI to the UK. The paper analyses the possible impacts of different Brexit scenarios on inward FDI to the UK. The paper's key arguments include that 'harder' forms of Brexit are likely to have worse outcomes in terms of inward FDI to the UK, with export platform FDI potentially significantly affected. The effects of Brexit could also be diverse in different industries, given the different motives for FDI, and also diverse in terms of the type of activity of the FDI. Moreover, given the patterns of FDI in the UK, the regional impacts of Brexit will not be evenly spread. The findings have clear policy implications surrounding the Brexit negotiation process.

Spillover effects between US ETFs and emerging stock markets

Abstract: The current paper focuses on return and volatility spillovers between the US ETF market and emerging stock markets using a sample of 40 US-listed iShares, which track several emerging stock markets indices from the Americas, Europe, Asia and South Africa. Advanced econometric and correlation analysis techniques are employed in our investigation. More specifically, a comprehensive correlation analysis, which includes the Pearson's simple correlation coefficient and the conditional constant correlation and dynamic conditional correlation coefficients, is performed to answer whether a significant comovement pattern exists between the two markets. Going further, three alternative models, namely an ARMA model, an ARMA-GARCH model and an ARMA-EGARCH model, are used to assess the existence of material spillover effects on returns. Finally, five models are used to accentuate any significant spillovers on volatilities between US emerging markets ETFs and their benchmarks. These models are the augmented GARCH model, the ARMA-GARCH model, the ARMA-EGARCH model, the scalar-BEKK model, and the ARMA-scalar-BEKK model. The empirical findings of correlation analysis reveal a high degree of comovement between the US ETF market and the underlying emerging stock markets. Furthermore, the results on return spillovers demonstrate that significant bilateral such effects exist between ETFs and benchmarks. This is also the case for volatilities.

Economic issues of innovation clusters-based industrial policy: a critical overview

Abstract: Criticisms vis-a-vis cluster policy are numerous, often confusing and really unhelpful; while some authors systematically question the merits, others on the contrary play a genuine role of counsel in his favour. This paper attempts to refocus the debate and analyses the economic issues and implications of the innovation clusters policy. We take a critical view of the literature on clusters, focusing on analysis of the effects of three industrial dynamics in perpetual movement within clusters, i.e. research and development, industrial location and technology cooperation. We assume that innovation cluster 'potentiates', by a synergistic action, the beneficial effect of each of these three industrial dynamics in favour of localised firms. It appears from our analysis that these expectations invested in cluster policy must be relativised. So the reasons for the rising power of cluster policies must be sought elsewhere than in a necessarily consensual and tangible evidence of their positive impacts.

The Schumpeter creative destruction hypothesis: a spatial assessment on Portuguese regions

Abstract: Shumpeter characterised the innovative role of the entrepreneur on economic growth (Schumpeter, 1942). By inventing new products, new processes or techniques, the entrepreneur searches for monopoly rents and forces the social and economic structure to evolve. The routines, characterised by accommodative behaviour, which may endure for long periods are suddenly broken, in a sequence of stagnation and evolutionary periods (Schumpeter, 1947). Therefore, according to the Schumpeter theory, innovation is at the core of economic growth, and goes further as it causes social and economic structural changes. The present article leads on with an empirical assessment about the Schumpeter creative destruction hypothesis at the Portuguese Regional level, using a spatial econometric framework, based on Elhorst (2003) and Bhattacharjee et al. (2012). We estimate a model with spatial fixed effect, exploring the relation between R&D intensity at the firm level, productivity and firm demography dynamics, using a panel data for the 28 Portuguese continental NUTsIII regions between 2006 and 2009. The results obtained confirm the association between productivity and firm demographic dynamics – i.e., regions with higher level of productivity present also higher rates of birth and mortality among firms. We have not found, as it would be predictable according to the Schumpeter hypothesis, statistical evidence of association between productivity and R&D intensity at the firm level. This result indicates that Portuguese firms behaviour is more of imitation rather than innovation.

Global business models mapping: the American and European models

Abstract: The globalisation of business markets requires rethinking existing management theories, and demands a global mental map, open to cultural diversity. The direct competitor, once across the street, might now be kilometres away, putting pressure on companies to continuously learning, developing their competencies and updating their knowledge. This refers not only to practical and technical knowledge, but also to a wide-reaching knowledge of cultures and markets, be they strong, emerging or weak. As such, this article seeks to present theoretical guidance on the manner in which managers 'think strategy' in two very different contexts – those of the USA and Germany. Management models for each, related to their specific cultural characteristics, are presented and the implications of each considered.

Drivers of R&D internationalisation - evidence from US firm investments in developing economies

Abstract: In today's global competitive environment, multinational corporations (MNCs) continue to internationalise their research and development (R&D) activities by progressively locating their innovatory capacity in developing nations. Hence, a panel study is developed to examine the effects of multiple factors that motivate US R&D investment in developing nations based on the analysis of longitudinal data collected from a variety of governmental, academic and public sources. The empirical results indicate that MNCs locate their foreign R&D activities in developing nations in order to exploit the available resource endowment. Furthermore, targeting the emerging markets does not appear to be a strong motivator that drives MNCs' foreign R&D investment. Instead, developing nations that have advanced telecommunication infrastructure, low labour costs and technology specialisation capabilities attract more foreign R&D investment. The paper concludes by identifying a range of issues, managerial and policy implications.

The acquisition of entrepreneurial competencies in a virtual platform: a structural equation model

Abstract: The goal of this work is to contribute to studies that aim to boost entrepreneurship education through the analysis and implementation of the virtual platform ExperimentaLab as a tool to support the activity of universities favouring entrepreneurship. There is a significant and substantial consensus that entrepreneurship is a skill that can be developed through education. Education should provide an innovative learning environment, thus helping students develop entrepreneurial competencies. In this vein, we designed and realised the ExperimentaLab. To test it and evaluate its educational impact, we ran simulations by role play. Data were analysed through structural equation model PLS-path modelling approach, showing that the designed structure of the ExperimentaLab fosters the acquisition of entrepreneurial competencies by would-be entrepreneurs.

The causality of dollarisation, interest rate and exchange rate: evidence from Laos

Abstract: In this paper, we examine the causality among the dollarisation, the interest rate differential, and the exchange rate risk in Laos. We use an ARDL approach to cointegration and a Granger causality test in a VECM for this purpose. We find that no long-term causality exists from the interest rate differential and the exchange rate risk to the dollarisation. But, we do find a unidirectional causality from the real interest rate differential to the dollarisation and the exchange rate risk short term. This finding implies that the interest rate differential reduces the dollarisation in the short term only.

Linking entrepreneurial orientation to brand reputation

Abstract: The relationship between entrepreneurial orientation (EO) and firm performance has a broad scholarly acceptance. However, scant evidence is available on how EO influences other variables, namely intangible assets. In this vein and in light of the resource-based approach, we hypothesise a positive relationship between EO and brand reputation. Based on survey data from 42 Portuguese small and medium enterprises (SME's), we find empirical support that globally EO has a positive and significant influence on brand reputation, and that the EO's dimension that most contribute is innovativeness. Overall, this study provides novel insights into EO and reputational resources literature.

Innovation and social responsibility in food ingredients market

Abstract: This paper deals with food ingredients market. It describes some international characteristics and trends focusing on the importance of innovation to assure continuity to the business preserving the respect of environment. Particularly the social responsibility of the market companies may produce improvements in B2C, but also in B2B channels. An entrepreneurial vision is presented as a necessary link with theoretical backgrounds. An empirical analysis is also introduced to validate some conclusions.

Population, immigration and growth in a Romer endogenous growth model

Abstract: Endogenous growth theory has not yet consistently incorporated population growth or immigration into its models As a result, in the present day, there is no universally accepted endogenous growth model explaining the empirical observed relationships between growth, population and immigration The present paper overcomes this inconvenience by designing a fully specified Romer endogenous growth model, completely micro-founded, that incorporates the existence of population growth and immigration and that allows the stylised facts of growth as well as the relationships between growth, population and immigration to be explained In addition, the proposed model is susceptible to calibration and simulation, and, when applied to the US economy, provides a good fit to the data

Stochastic frontier models with flexible random coefficients

Abstract: We propose a stochastic frontier model with random coefficients having a flexible distribution. The distribution is modelled non-parametrically. It is shown that maximum likelihood estimation reduces to a fixed-point problem. A fixed-point iteration is proposed and we show that there is a unique regular fixed point. The fixed-point iteration is used in the context of MCMC to perform inferences for all unknown parameters including the optimal support of the distribution of random coefficients.

Investment policy and economic performance of Italian listed companies: a multivariate analysis

Abstract: This study focuses on the investment policy of companies listed on the Italian Stock Exchange in the period between 2007 and 2014. In particular, this research concentrates on the industrial and technological sectors, which have deep differences in terms of internal structure and business strategy. As a consequence, there emerged the curiosity to investigate whether the specific type of investments have an impact on the economic performance, in terms of operating margin (EBIT). This study starts with the analysis of trends and relationships between tangibles, intangibles and operating income. Using the Pearson correlation ratio, the authors aimed at finding evidence of a hypothetical correlation in 2014 between tangible and intangible investments and EBIT. In addition, in order to verify if the trend of the economic performance is affected, a MANOVA multivariate analysis is used, by starting from the production function and its development.

Italian credit cooperative banks: the fundamental role in supporting the growth of SMEs and family businesses

Abstract: Our research concentrates on the role of Italian credit cooperative banks, supporting the entrepreneurship and the development of SMEs and family businesses. We took into consideration the data of loans, allocated by those banks in 2014. We tried to find the relationship between the banking system and the world of SMEs and family businesses. This research represents the first step of a far deeper analysis. In this stage, we aimed at providing the groundwork for further empirical and qualitative analyses. Therefore, we try to improve the existing literature by using a conceptual approach. Despite the limitations of this research, researchers in the field of SMEs and credit cooperative banks can consider the opportunities for further developments of our analysis. Our findings give evidence that SMEs and family businesses need the support of the credit cooperative banks, in order to further exploit the opportunity to expand their businesses.