Foreign Direct Investment in the Banking Sector: Empirical Evidence from Turkey

Multinational bank activities have gradually risen in developing countries since the beginning of the globalisation process. Rising foreign bank activities in developing countries have motivated researchers to investigate foreign banks, comprehensively. Turkey is a typical example of a developing country that achieved a tremendous growth rate in foreign bank asset, especially throughout the last decade. The aim of this thesis is to examine two-way linkage; (1) between foreign bank penetration (FBP) and banking variables; (2) between FBP and country risk and (3) between FBP, foreign direct investment (FDI) and foreign portfolio investment (FPI) in Turkey. Therefore, this thesis is constructed by three empirical sections. Moreover the pattern of FDI inflow and outflow in the world and in Turkey has been analysed, chronologically. In addition, the theory of FDI is taken into account and existing FDI theories has been criticised. In the first empirical work – Chapter 3 - the short run and long run relationship, if it exits, between FBP and determinants of bank performance (namely, domestic bank assets, domestic credit and banking profitability) in Turkey was investigated after controlling DGDP and 2001 financial crisis (DUM2001). The outcome of the Granger causality test indicates that there was unilateral causality which runs from DDB to DFBP . Moreover, I also found feedback causality between DFBP and DCREDIT . By employing impulse response functions, I found that there is positive relationship between DFBP and DCREDIT as I expected. Moreover, the response of DFBP to one standard deviation shock in domestic bank assets is initially statistically significant and positive. The reverse effect is statistically significant and positive. In the final model, the response of DFBP to one standard deviation shock in profitability (PRO) is significant and positive at 3rd quarter. The reverse effect is surprisingly positive but not statistically significant. Specifically, what has not been also investigated deeply in the empirical literature is the two-way linkage between foreign bank penetration and risk such as political, financial and economic. Thus, in chapter 4, linkage between FBP and country risk (namely, political risk, economic risk and financial risk) was examined in Turkey using quarterly data from 1994Q1 to 2009Q4. My finding indicated that I found one error correction term significant and positive in bivariate vector error correction in model 1 and 2, implying that in the long run, foreign bank penetration has contributed to economic and political risk. Moreover, short run causality based on VAR approach between DFBP and financial risk is investigated but I failed to find any significant causality in the VAR model after controlling DGDP and 2001 financial crisis, even at the 10% level. By analysing impulse response functions, I could not detect any significant relationship between DFBP and host country risk variables in the short run. This is because adding control variables (DGDP and DUM2001) make the relationship between host country risk variables and DFBP statistically insignificant. Finally, I investigated two-way linkage between FBP, FPI and FDI in Turkey after controlling DGDP and 2001 financial crisis. The finding from the VAR based block exogeneity wald test indicated that changes in DFBP significantly lead to changes in DFDI and there is also unilateral causality which runs from FPI to DFBP. Moreover, using the variance decomposition technique I found that DFDI and FPI have little explanatory power for the evolution of DFBP in Turkey. The contribution of DFBP to the variability of DFDI is more than that of FPI. The contribution of DFDI to FPI variability ranges between 0.000% and 9.122% throughout 12 quarter periods whilst the contribution of DFBP to FPI variability ranges between 0.000% and 7.611%

Exploring the Nexus between Political Risk and Financial Risk in the Balkan Countries: A Wavelet-Based NARDL Coherency analysis

The empirical investigation of which risk factor—political or financial—is the optimal driver of country risk in emerging economies in the twenty-first century has grown into a significant and volatile issue in recent decades. This paper investigates the linkages between political risk and financial risk in four Balkan economies (i.e., Greece, Albania, Bulgaria, and Romania) from 1984 Q3 to 2018 Q4, using non-linear autoregressive distributed lag co-integration (NARDL) and wavelet coherence approaches. As a result, findings from the links between political risk and financial risk are being used to provide significant insights into effective urban planning in Balkan cities. The outcomes of the NARDAL analysis indicate that there are short-term and long-term asymmetric links between political risk and financial risk in the Balkan countries except for Romania. The wavelet coherence study also revealed that there is significant vulnerability between political risk and financial risk at different frequencies in the region, also, political risk is a key for predicting financial risk over the selected study period at different frequencies in Albania and Bulgaria

The regime switching evidence of financial-economic-political risk in Turkey

In recent time, Turkey could be said to have experienced different levels of Economic Risk, Financial Risk, and Political Risk from low- to high-level. This study investigates the linkage between country risks, namely Financial Risk, Economic Risk, and Political Risk (FEP risk) in Turkey for the period 1984Q1 to 2019Q1 by using threshold cointegration, Markow-switching regression (given the nonlinearity and structural breaks observed in the time series variables), and frequency domain causality approaches. The empirical findings of this study reveal that (i) nonlinear cointegration between Economic Risk, Financial Risk, and Political Risk in Turkey is statistically significant given the evidence of threshold cointegration test, which determines the structural breaks endogenously; (ii) there is positive linkage among the component of country risk at different volatility periods; (iii) there is a significant Granger causal linkage between Economic Risk, Financial Risk and Political Risk at the different frequency levels. The study is likely to open debate about the literature since the study concludes with a discussion on short-run and long-run implications for economic, political, and financial stabilises, thus offering policy suggestions for the policymakers in Turkey.© The Author(s) 2022. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.fi=vertaisarvioitu|en=peerReviewed

Innovation capacity, business sophistication and macroeconomic stability: empirical evidence from OECD countries

The main aim of this study is to explore the linkages between innovation capacity, business sophistication, and macroeconomic stability within OECD countries. In order to obtain information regarding the relationship between time series variables, the Pedroni cointegration, Kao cointegration, fully modified ordinary least square, dynamic ordinary least square, Granger causality, and Dumitrescu Hurlin causality tests are employed. The empirical results reveal that improvement in business sophistication triggers innovation capacity and support macroeconomic stability. Innovation capacity would also need to be expanded in the long-run, which positively leads to advanced business sophistication that has a cyclical effect. If policymakers intend to accelerate business sophistication, then their attention should be directed towards maximizing the economic indicators in the long-run. To the best of our knowledge, the linkage between innovation capacity, business sophistication and macroeconomic stability in OECD countries has not been comprehensively explored through the use of a single dataset. Thus, the findings of this study could lead to a new debate regarding the concept

A comparative analysis of COVID-19 and global financial crises: evidence from US economy

The COVID-19 crisis has had deep adverse effects on a global level, affecting many economies and worsening their conditions which may have led to severe recession or even depression. The numbers of positive cases have risen sharply over the last few months, and the fatalities have also reached their peak. This study aims to examine the impact of the global financial crisis, and the COVID-19 pandemic on the macroeconomic variables of the US economy. It also provides an understanding in a descriptive format, to analyze and compare the global financial crisis and COVID-19 pandemic, in a tabulated and graphical format. For analysis purposes, the tables and average method have been used. For the graphical formats, charts have been used for the later year of 2008, and the beginning of the 2009 global financial crisis. The first six months of the spread of the COVID-19 pandemic have also been taken into consideration. The results have confirmed that the current COVID-19 pandemic shows more severity in terms of economic activity, than the global financial crisis had experienced. Moreover, the impact of the crisis on the recession probabilities in the current pandemic is lower than that at the time of the global financial crisis

ULOGA OBITELJSKE KONTROLE U ODREĐIVANJU STRUKTURE KAPITALA: SLUČAJ NEFINANCIJSKIH PODUZEĆA UVRŠTENIH NA BURZU

This study aims to examine the effect of family control on the corporate financing decision of firms in Pakistan. This study uses the annual data of 100 non-financial firms listed at PSX for the period 2005-2012. To estimate the impact of family control on the corporate financing decision, we employ the ordinary least square (OLS) method. The findings of the univariate analysis show that a significant difference exists between family and nonfamily firms based on many characteristics of firms. Multivariate analysis results show that family firms maintain significantly high “total debt ratio” and “short-term debt ratio” compared to non-family firms. There are two reasons why family firms keep high debt ratios compared to non-family firms. First, family-owned firms do not want to dilute their ownership, and that is why they fulfill their major financing needs through debt instead of issuing new shares in the market. Second, family firms in Pakistan use extra cash flows for their private benefits. These findings reveal useful insights for investors, banks, regulators, and business families of Pakistan.Ovaj rad ispituje učinak obiteljske kontrole na odluke o financiranju poduzeća u Pakistanu. Korišteni su godišnji podaci 100 nefinancijskih poduzeća navedenih na PSX-u za razdoblje 2005.-2012. Za procjenu utjecaja obiteljske kontrole na odluku o financiranju poduzeća korištena je metoda običnog najmanjeg kvadrata (ordinary least square, OLS). Nalazi univarijantne analize pokazuju da postoji značajna razlika između obiteljskih i neobiteljskih poduzeća na temelju brojnih karakteristika poduzeća. Rezultati multivarijantne analize pokazuju da obiteljska poduzeća imaju značajno visok “omjer ukupnog duga” i “omjer kratkoročnog duga” u usporedbi s neobiteljskim poduzećima. Dva su razloga zašto obiteljska poduzeća drže visoke stope duga u usporedbi s neobiteljskim poduzećima. Prvo, obiteljska poduzeća ne žele razvodnjavati svoje vlasništvo i zato svoje potrebe financiranja zadovoljavaju dugovima umjesto da izdaju nove udjele na tržištu. Drugo, obiteljska poduzeća u Pakistanu koriste dodatne novčane tokove za svoje privatne koristi. Ovi nalazi otkrivaju korisne uvide za investitore, banke, regulatore i poslovne obitelji Pakistana

Does quality management system help organizations in achieving environmental innovation and sustainability goals? A structural analysis

The swift decline in the quantity and quality of natural resources and the public’s increased awareness about it is putting steep pressure on manufacturing and services firms to follow ecofriendly practices. The United Nations has made it imperative for organizations to ensure sustainability in their operations. This study investigates whether the quality management system within an organization helps them achieve environmental innovation and sustainable development goals? It also examines does environmental innovation facilitates firms in achieving sustainable development goals? Six quality management practices are taken from the American ‘Malcolm Baldrige National Quality Award’; environmental innovation includes product and process innovation, and corporate sustainability includes environmental, social, and economic dimensions. The authors followed the non-probability convenience sampling technique to collect data from the junior, middle, and senior managers from medium and large-size services and manufacturing firms from July 2019 to October 2019. The structural analysis indicated that quality management facilitates firms to achieve their environmental innovation and sustainability goals; environmental innovation significantly enables organizations to achieve sustainability goals. Dimensional analysis indicated that quality management significantly impacts all studied dimensions. However, environmental innovation is found to have an insignificant impact on social sustainability. The findings of this study provide valuable insights to the managers of the manufacturing and services firms concerning eco-innovation and sustainability goals and conclude by offering recommendations for future studies

Does resource efficiency matter for environmental quality in Canada?

In order to combat climate change, the OECD emphasized the need to minimize the environmental impact of material use, as well as promote resource efficiency and accelerate the creation of a circular economy. The present study objects to promote a new debate about Canadian environmental quality and resource efficiency. In other words, this paper aims to capture the effect of resource efficiency on environmental quality in Canada while controlling financial development, economic growth, and energy. Nonlinear ARDL bounds test results indicate the significant long-run linkage between environmental quality, resource efficiency, financial development, economic growth, and energy in Canada. Moreover, the asymmetric results underline that 1) resource efficiency mitigates environmental degradation; 2) economic growth and energy uses in Canada significantly increase consumption-based CO2 emissions; 3) financial development positively contributes to environmental stability. Therefore, policymakers in Canada make sure that circular economies and resource efficiency can help reach net zero and combat climate change

Testing the volatility spillover between crude oil price and the U.S. stock market returns

The study aims to examine the volatility transmission between the West Texas Intermediate (WTI) crude oil price returns and the U.S. stock market (S&P500 index) returns for the period 2006-2016. In the empirical analyses, univariate GARCH and multivariate GARCH (BEKK-GARCH) models are employed to investigate potential volatility spillover effect of crude oil price returns on the S&P500 index returns or vice versa. The results of GARCH methods reveal that (i) volatility spill-over effect of S&P500 index returns on the crude oil returns is more significant than the volatility spillover effect of crude oil on the S&P500 index returns by using univariate GARCH model; and (ii) there is a one way volatility spillover effect that runs from S&P500 index returns to crude oil returns when we apply multivariate BEKK-GARCH model. These findings have implications for in-vestors and oil-stock portfolio holders for their portfolio decisions in order to manage their risks on their international investments. Further, crude oil investment participants should consider the changes in U.S. stock market index returns in order to predict the expected volatility in the crude oil returns

Panel cointegration: Long-run relationship between internet, electricity consumption and economic growth. Evidence from OECD countries

The linkage between electricity consumption, internet demand and economic growth is aimed to investigate in this study in 35 OECD countries for the period 1993-2014. Panel cointegration, Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS) and Dumitrescu-Hurlin causality tests were performed to capture the potential long-run and causal linkages among the three variables. The findings from the FMOLS and DOLS models indicate a positive linkage between electricity, internet demand and economic growth in the long-run. Results from the Dumitrescu-Hurlin causality confirm feedback causality between electricity consumption and internet demand and unilateral causality running from economic growth to electricity consumption