The impact of firm size and liquidity on the cost of external finance in Africa

Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explains trading costs. Costs of equity are derived from an augmented Capital Asset Pricing Model for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in Sub-Saharan Africa (SSA), plus London and Paris as examples of integrated markets. Minimum variance portfolios are constructed and asset weights derived, with the sample divided into countries dependent on their legal regime. Portfolio weights are shown to be directly related to well-regulated markets with high standards of corporate governance and disclosure, and firms seeking cost-effective finance from SSA stock markets are at a distinct disadvantage compared with those in Northern Africa, South Africa and, in particular, London and Paris

Sector level cost of equity in African financial markets

This paper assesses the effectiveness of Liu (2006) metrics in measuring illiquidity within a multifactor CAPM pricing model. Costs of equity are estimated using this model for the major sectors within Africa’s larger equity markets: Morocco, Tunisia, Egypt, Kenya, Nigeria, Zambia, Botswana and South Africa. In all countries, the cost of equity is found to be highest in the financial sector and lowest in the blue chip stocks of Tunisia, Morocco, Namibia and South Africa. At an aggregate level, Nigeria and Zambia have the highest cost of capital

The determinants of IPO firm prospectus length in Africa

This paper studies the differential impact on IPO firm listing prospectus length from increasing proportions of foreign directors from civil as opposed to common law societies and social elites. Using a unique hand-collected and comprehensive sample of 165 IPO firms from across 18 African countries the evidence suggests that increasing proportions of directors from civil code law countries is associated with shorter prospectuses while the opposite is true for their common law counterparts. Furthermore increasing proportions of directors drawn from elevated social positions in indigenous society is related to increasing prospectus length in North Africa while being insignificant in SSA

The impact of institutions, ownership structure, business angels, venture capital and lead managers on IPO firm underpricing across North Africa

This paper examines the determinants of IPO underpricing in a unique and comprehensive, sample of 86 IPO firms from across North Africa between 2000 and 2013. The findings suggest that, underpricing is used as a mechanism by which to stimulate excess demand (subscription) for newly, issued stock in order to create a relatively small but highly dispersed, and thus disempowered, minority shareholder base. Domestic venture capital and to lesser extend business angels are, associated with elevated underpricing while the reputational impact from foreign venture capital and, lead managers infers lower underpricing. In terms of institutions and state-level corruption control, policies are most closely linked to substantial reductions in underpricing

Institutional impact on the expropriation of private benefits of control in North Africa

This paper examines the effectiveness of six institutional quality measures, namely corruption control, effective government, political stability, regulatory quality, rule of law and voice and accountability, in inhibiting self-rewarding behaviour of boards in terms of their compensation as well as in influencing the likelihood of disclosure of individual executive salaries in IPO listings prospectuses. Using a unique and comprehensive dataset of 78 hand-collected IPO firms from across North Africa from 2000 to 2012 I find substantial evidence that government effectiveness and corruption control are important in inhibiting director self-reward and expropriation while political stability is more associated with increased likelihood of transparency in reporting of salaries. In addition firms from poor informational environments are more likely to initiate enhanced self-governance and transparency so as to overcome institutional deficiencies

The institutional determinants of private equity involvement in business groups – the case of Africa

This study examines the governance attributes of post-IPO (initial public offering) retained ownership of private equity in business group constituent firms in contrast to their unaffiliated counterparts, in 202 newly listed firms in 22 emerging African economies. We adopt an actor centered institutional-theoretic perspective in rationalizing institutional voids and the advantages of maintained governance by both business angels (BA) and venture capital (VC) private equity. Our findings reveal private equity retain higher post-IPO ownership in business group constituents compared to unaffiliated firms and that this is inversely moderated in the context of improving institutional quality – where this is particularly strong in case of foreign VC as opposed to domestic VC or BA. Our result adds to the literature on multifocal corporate governance mechanisms and the institutional determinants of private equity investment

Increased lytic efficiency of bovine macrophages trained with killed mycobacteria

Innate immunity is evolutionarily conserved in multicellular organisms and was considered to lack memory until very recently. One of its more characteristic mechanisms is phagocytosis, the ability of cells to engulf, process and eventually destroy any injuring agent. We report the results of an ex vivo experiment in bovine macrophages in which improved clearance of Mycobacterium bovis (M. bovis) was induced by pre-exposure to a heat killed M. bovis preparation. The effects were independent of humoral and cellular adaptive immune responses and lasted up to six months. Specifically, our results demonstrate the existence of a training effect in the lytic phase of phagocytosis that can be activated by killed mycobacteria, thus suggesting a new mechanism of vaccine protection. These findings are compatible with the recently proposed concept of trained immunity, which was developed to explain the observation that innate immune responses provide unspecific protection against pathogens including other than those that originally triggered the immune response.Funding for these studies was provided by the EU project WildTBVac (Contract #613799) and by grants from the Instituto Nacional de Investigación y Tecnología Agraria y alimentaria (INIA, RTA2011-00049) and the Ministry of Science (MINECO, AGL2014-56305) and European Funds Regional Development (FEDER).Peer Reviewe

Does board independence influence financial performance in IPO firms? The moderating role of the national business system

Prior evidence suggests that board independence may enhance financial performance, but this relationship has been tested almost exclusively for Anglo-American countries. To explore the boundary conditions of this prominent governance mechanism, we examine the impact of the formal and information institutions of 18 national business systems on the board independence-financial performance relationship. Our results show that while the direct effect of independence is weak, national-level institutions significantly moderate the independence-performance relationship. Our findings suggest that the efficacy of board structures is likely to be contingent on the specific national context, but the type of legal system is insignificant