Testing the validity of free cash flow hypothesis: Evidence from Nigeria

Purpose: This study empirically tests the validity of the free cash flow hypothesis among firms quoted on the Nigerian Stock Exchange (NSE) from 2007 to 2017. Research methodology: The study employed a dynamic panel system Generalized Method of Moments (GMM) in analyzing the data generated. Results: the result failed to provide empirical evidence in support of the Jensen free cash flow hypothesis in Nigeria. The equally showed that a high concentration of shareholding in the hand of a few individual increases the amount of dividend paid out to shareholders. The result is however robust using different methods.  Limitations: We focused only on testing the validity of the free cash flow hypothesis proposed by Jensen (1986). Contribution: The study provided empirical evidence that invalidates the propositions of the free cash flow hypothesis among publicly quoted firms in Nigeria. The result is robust using different estimation techniques.  Keywords: Free cash flow hypothesis; Dividend payou

Impact of income level and foreign aid on economic growth in Sub-Saharan Africa: the case of Anglophone and Francophone countries

The study examines the impact of foreign aid on economic growth (EG) of 40 Sub-Saharan African countries classified according to their colonial history and the level of income. Domestic capital formation and labour participation served as control variables. For empirical analysis, annual data for the period 1982–2018 are used, and a structural model is estimated using the pooled mean group estimation approach. The results reveal that (1) bilateral foreign aids (bfa) strongly favour the Francophone better than the Anglophone as it exerts strong favourable effect on the former (2) Multilateral aid exerts strong unfavourable effect on the Anglophone but weak on the francophone (3) only bilateral aid is a significant positive determinant of EG in low income countries (LICs) and low middle income countries (LMICs) in the long-run and in upper middle income countries (UMICs) in the short-run. One percent increase in bfa increases EG by 1.829%, 18.95%, 7.998%, 40.19% and 187.2% in the Anglophone, francophone, LICs, LMICs, and UMICs, respectively. These suggest that to significantly increase output productivity in the regions more of bilateral aid is required. To encourage inflow of foreign aid, complementary gross fixed capital formation should be increased and labour productivity enhanced

Official development assistance, income per capita and health outcomes in developing countries: Is Africa different?

In this study, we investigate the effect of official development assistance and income per capita on health outcomes in developing countries. Health outcome is proxied by life expectancy and under-5-mortality rate. We accounted for the endogeneity problem in the model by employing a dynamic two-step system generalized method of moments (GMM) estimator. We find that official development assistance does not improve health outcome in developing countries, while income per capital significantly improves health outcome in developing countries. The study reports that CO2 emission is not a significant determinant of health outcome in developing countries but the prevalence of HIV and Immunization significantly determines health outcomes in developing countries. More specifically the prevalence of HIV increases the under-5-mortality rate and decreases life expectancy; immunization increases life expectancy but decreases under-5-mortality rate. It was equally revealed in the study that health outcome in Sub-Saharan Africa (SSA) does not significantly differ from health outcomes in other developing countries. We equally reported that the effect of income per capita on health outcome in Sub-Saharan Africa countries is not significantly different from that of non-SSA countries. The effect of official development assistant on health outcome in SSA was found to be significantly different from non-SSA countries. The study reveals that the effect of ODA on life expectancy in SSA is less compared to its effect on non-SSA countries. Similarly, the effect of ODA on under-5-mortality is higher in SSA countries as against other non-SSA countries

Impact of Digital Payment System on the Efficiency of the Nigerian Banking Sector

In this paper we examine the contribution of digital payment system on the efficiency of the banking sector in Nigeria. Quarterly data covering 2009-2018 were generated from Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank database. We employ the Ordinary Least Square (OLS) regression, after testing for the properties of time series using Augmented Dickey-Fuller (ADF) and Philip-Peron (PP) test of stationarity. Engle and Granger test for co-integration were conducted to determine the existence of long run relationship. The speed of adjustment was determined using the Error Correction Model (ECM). The result of the study shows that digital payments proxied by Automated Teller Machine (ATM) transactions, Point of Sales (POS) transactions, Mobile Payment (MP) transactions and Web Payment (WP) Transactions has negative and significant impact on bank efficiency proxied by bank overhead cost both in the long and short run. The effect of digital payment on total cost as a ratio of income varies according to the variable used to proxy digital payment. Our finding also reveals that digital payment contributes positively to noninterest income, return on equity, and return on assets of banks in Nigeria. The result suggests that a well-developed digital payment system in Nigeria will improve banking sector performance hence the overall performance of the economy. We therefore recommend that Nigerian banks should formulate policies that will enhance accessibility of the available digital payment platforms by all users of financial services in Nigeria so as to increase the volume and the value of their transaction and as well strive to explore other new digital payment systems