Trade credit and bank credit as alternative governance structures in South Africa: evidence from banking sector development

Financial sector development is an influential force that outlines the financing and governance of firms in emerging economies. Suppliers and bankers represent alternative governance structures to a firm because of their trade credit and loan requirements, respectively. The continuous monitoring of investment by banks and suppliers impacts on corporate disclosure and practices. The study compares a sample of Johannesburg Stock Exchange (JSE) firms listed on the Socially Responsible Investment (SRI) index which measures corporate governance and those not listed on the index. A Generalized Least Squares (GLS) random effect regression of banking sector development and trade credit of firms listed on the JSE SRI and non-SRI listed firms was done to ascertain whether trade credit gives firms a preferred governance system and structure. The findings affirm that good corporate governance practices improve access to bank loans for working capital financing and good governance practices do not consequently result in more bank loan as a preferred governance structure for working capital financing compared to use of trade credit

Trade credit policy: revisiting targeting of trade payable and receivables in BRICS listed firms

The study investigates if firms in BRICS countries pursue a target optimal level of trade credit policy. Trade payables levels may not always at the desired levels and firms take time to adjust from real to target levels. The level of financial sector development may influence firms’ speed and cost adjustment. Employing a dynamic panel data model estimated with the difference and system Generalized Method of Moments estimation techniques on a panel of 3353 listed BRICS non-financial firms, the study established that in pursuit of growth opportunities firms have a deliberate trade credit target levels. Firms pursue a target optimal level of trade payables and trade receivables and firm size affects creditworthiness and access to capital markets, which influences speed of adjustment from current to desired levels of trade payables. Investment in trade receivables require access to capital for additional funding and poorly developed financial sectors makes it costly to adjust towards optimal credit level. Different levels of financial sector development affect access to alternative sources capital which influences optimal trade credit policy

Trade credit forecasting: empirical analysis using a ratio targeting approach

This study employs a panel data model that uses trade credit's own recent history to predict trade credit levels. A predictive model of trade credit is developed to predict the levels of trade payables and receivables. Previous forecasting techniques do not incorporate the targeting aspect and long period historical data. A target ratio should be set for trade payables and trade receivables to total assets. Trade credit is debt finance which is maintained at a certain ratio to total assets. In this paper, we make use of panel data from 230 non-financial South African listed firms from 2001 to 2013. Firms use trade credit targeting to pursue growth opportunities and their size affects their access to capital. Trade credit's recent history can be used to predict target trade credit levels. The paper makes an original contribution by developing a model to predict the level of trade credit

Corporate governance, structure and accountability as affected by national government infrastructure in developing countries

Businesses in developing countries face different challenges than those in economically developed countries. Markets and supply chains are less well-established. Dissemination of information is uneven. Because governmental infrastructure has limited ability to support business operations, businesses take on responsibilities that elsewhere are handled by a central government. This study reviews key elements of corporate governance. The study then reviews the banking and manufacturing sectors in Zimbabwe with attention to the presence or absence of financial infrastructure, legal infrastructure, market challenges, supply chain and government involvement to support corporate governance structures and systems. Recommendations for policy and practice changes are recommended. The present analysis of Zimbabwe can guide research on and policy recommendations for governance in other developing countries

Content analysis of public debt in prescribed undergraduate South African economics textbooks

In the last fifteen years, South Africa‟ national debt has more than doubled as rising public debt has become one of the most critical economic concerns confronting the world economy. It is vital that university students who are future policymakers and studying introductory economics, understand the severity of the risks that these record debt levels pose. This study analyses how three prescribed South African first-year university economics textbooks treat public debt content. Using textbook content analysis methodology, we compared how the texts present public debt, reflect on economic history, and consider alternative views to dominant perspectives on public debt. We find that the books do not address recent literature on public debt, notably arguments on the link between debt and economic growth or inflation. This study recommends that textbooks include more historical examples, use more graphs to illustrate public debt data, and offer differing views to the mainstream on public debt

When Digitalization Meets Omnichannel in International Markets: A Case Study from the Agri-Food Industry

Digitalization is prompting small and medium-sized enterprises to structural and strategic transformations, also providing new opportunities to expand and succeed in foreign markets. However, relatively few studies have investigated emergent digital technologies in international business management. Contextually, there is still a dearth of research on the multi-faceted impacts of digitalization on omnichannel strategy characterizing most of the global business environment today. This paper, therefore, aims to examine the impact of digitalization on omnichannel choices adopted by internationalized SMEs. A qualitative approach, based on a single case study methodology, is adopted. An Italian agri-food SME is chosen as this industry is considered a key and distinctive pillar of Made in Italy in the international markets. Findings reveal the potential of digital technologies’ applications in an omnichannel environment, blurring the boundaries between channels, through a synergetic integration of them. This evidence contributes to the existing literature on technology management and omnichannel strategies in the international context by rereading these phenomena through a smart ecosystem lens. In addition, this study provides practical insights on how multiple channels adopted by Made in Italy SMEs can be integrated, managed, and operated synergistically on international markets to sustain a digitalized value creation

Corporate Finance and Financial Development: A Conclusion

The present volume reviewed the corporate finance and financial development within emerging markets context. The culmination of the contributions unveiled some of the corporate finance issues that bother on financial development in the emerging markets of Asia and Africa. The contributions unveiled theoretical, policy, and practical implications for improving corporate finance and financial development for the growth of the emerging market economies. Financial development is largely underpinned by ICT development and innovation of financial services in emerging markets

Lessons in Financial Governance from Bowen’s Family Systems Model

All organizations are social systems. The family is the first social system to which each person belongs. A business organization is also such a system. Family theorists describe family relationships and use this understanding to help families to improve their functioning. These insights can also be applied to business organizations and their governance. The present paper uses Bowen’s family systems theory to understand financial governance and governance relationships. Bowen’s eight concepts of family systems are triangles, differentiation of self, nuclear family emotional process, family projection process, multigenerational transmission process, emotional cutoff, sibling position, and societal-emotional process. These concepts are discussed in light of how financial information is shared in a business, how board composition affects the oversight of financial operations, how leadership balances financial and operational demands, and how the social interactions within the business interplay with the macro social-industrial environment. For example, a well-functioning family helps a family member develop into an independent adult. Likewise, the effective business leader enables the financial department to develop autonomy, allowing that department to provide meaningful, objective information for business decisions. When this does not occur, problems can arise which affects family stability and business efficiency. Suggestions for further research are offered. In particular, the connection between family theories and agency and social models of governance is explored. The models also are relevant to notions of who are the business’s stakeholders. The overlap between business systems and family systems which has become more evident during the COVID-19 pandemic speaks to the relevance of the concepts in this paper to future research and business planning

Corporate Finance and Financial Development: An Introduction

In recent years, the discussion about the relationship between corporate finance and financial development has taken center stage. This chapter offers a comprehensive overview of financial development theory. Emerging economies are susceptible to rapidly changing financial sectors and products as well as financial upheavals. We seek a deeper understanding of financial development issues that are unique to emerging markets which can be gained by looking at the broader concepts that are topical in the region, especially in the post-crisis era