Corporate financing in transition: Implications for institutions and ownership

This thesis was submitted for the degree of Doctor of Philosophy and awarded by Brunel University.The present thesis examines the implications of ownership and institutions for corporate financing in Central and Eastern Europe. There are three empirical chapters (chapters 2, 3 and 4). Chapter two examines the role of business networks for firm external financing. Our central hypothesis here is that firms’ affiliation to business association is likely to be beneficial in securing external finance (especially bank finance) in countries with weak legal and judicial institutions, as it helps banks and financial institutions to minimize the underlying agency costs of lending. Using recent EBRD-World Bank BEEPS data, we find some support to this central hypothesis in our sample. Importance of foreign banks for economic development of CEE countries has been emphasized in the literature though there is wide dispersion in foreign investment in the region. In this context, chapter three (i.e., the second empirical chapter) focuses on the implications of corruption for foreign bank entry and ownership structure in Central and Eastern European countries. The chapter argues that the presence and persistence of corruption (both absolute and relative) may adversely affect costs of setting up as well as running day-to-day operations of foreign banks in host emerging economies. Using primarily Bankscope bank-level data we find that greater absolute and relative corruption may lower foreign bank entry, greater relative corruption may encourage foreign greenfield entry in our sample; while relative corruption is not significant for foreign takeover. The latter highlights the importance of encouraging foreign investors from countries with similar institutions. Finally, considering the implications of ownership for bank capital and performance in chapter four (the final empirical chapter) in light of the focus on bank capital and capital regulation in discussions after the recent banking crisis, we argue that the relationship between bank capital and bank performance crucially depends on bank ownership structure. Using Osiris data we examine foreign greenfield and other joint venture (JV) differential effect of high bank capital on bank performance. A significant positive effect of foreign Greenfield (as opposed to JV) bank capital on bank performance, after controlling for all other factors is found. We attribute this to better governance compared to varied ownership arrangement in other joint venture banks. Thus wide dispersion in the quality of institutions and ownership explains a great deal of variation in the economic performance of countries in the region. We hope findings of this thesis would inform policies and will also influence future research

Deposit money bank credit to small and medium enterprises, socio-economic performance and economic growth in Nigeria

Small and Medium Enterprises (SMEs) have popularly been argued to contribute positively to economic growth of countries of the world through their positive effect on socio-economic development of the countries. However SME access to credit remains essential for SMEs continued positive contribution. In the case of Nigeria, unemployment and poverty are two major socio-economic performance indicators in which she has performed poorly over the years, despite efforts by the Nigeria government to boost credit availability to SMEs. In that light, this study explores, the relationship between SME credit and each of Unemployment and poverty respectively, using Pearson’s correlation, and further examines the impact of Deposit money bank credit to SMEs on economic growth in Nigeria using Ordinary least squares regression. Data employed for this study was annual data from 1992 to 2015 obtained from the Central Bank of Nigeria Statistical Bulletin. The Pearson’s correlation revealed a negative but insignificant relationship between SME credit and Unemployment, and a negative and highly statistically significant relationship between SME credit and poverty. The results of Ordinary Least Squares regression revealed that SME credit has a negative and highly statistically significant impact on economic growth in Nigeria. Based on the results of the study it is recommended that the Nigeria government should support SMEs with necessary training in risk management so as to increase SME capability to effectively manage the risk of their operations, the Nigeria government should increase provision of infrastructural facilities in order to reduce the operating costs of SMEs, and Nigeria deposit money banks should be equipped with necessary technology to effectively assess the creditworthiness of SMEs in applying for loans, amongst other recommendations

HUMAN CAPITAL DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA

This study employs the ordinary least square regression analysis to examine the impact of human capital development on economic growth of Nigeria, using annual time series date from 1981 to 2015. The empirical results show that human capital development has significant impact on economic growth, as proxy by the gross domestic product. In line with theory, the human capital development indicators namely secondary school enrolment, tertiary school enrolment, total government expenditure on health and total government expenditure on education exhibit positive and statistically significant impact on economic growth of Nigeria which implies that these indicators are indispensable in the achievement of growth in the Nigerian economy. However, life expectancy and primary school enrolment exhibit a negative and statistically insignificant impact on economic growth of Nigeria. The study concluded that the Nigerian government should ensure to allocate adequate resources for the development of human capital in order to enhance economic growth in Nigeria. The study also recommended that going forward the government and policy makers should increase its total expenditure on education, ensure sufficient budgetary allocation on health expenditure, and ensure a standard is set across all secondary and tertiary institutions in the country so that proper human capital required for any individual to become productive and economic growth is enhance

Effect of Interest Rate Determinants on the Aggregate Performance of Deposit Money Banks in Nigeria’s Banking Sector

In this paper, the effect of selected interest rate determinants on the performance of Deposit Money Banks in Nigeria are investigated. In this context, the interest rate determinants are analyzed for their significant effect on the performance of the banks as measured by the Asset size, and related to that the determinants are further analyzed for significant difference between periods of high bank performance and low bank performance over the period of 1998 to 2015.. Data were sourced from the Central Bank of Nigeria Statistical bulletin and World Development Indicators. The findings of Multivariate ordinary least squares regression revealed that exchange rate has a positive and statistically significant effect on Aggregate Deposit Money Bank performance, Monetary policy rate and Credit Risk have a negative and statistically significant effect on Deposit Money Bank performance, while Inflation rate and savings deposit rate have a statistically insignificant effect on Aggregate Deposit Money Bank performance. Results of independent samples t-test revealed significant difference in means of interest rate determinants between high and low aggregate bank performance periods. The study recommends Naira devaluation and reduction of monetary policy rate amongst other recommendations to boost aggregate bank performance in Nigeri

Effect of Diverse Tax Revenues and Effective Government on Economic Growth in Nigeria

The present study explores the effect of different tax revenues in Nigeria, namely Petroleum profit tax, Value added tax, customs and excise duties, and company income tax, on Nigeria’s economic growth taking into account the role of Government effectiveness using time series data from 1994 to 2015  Ordinary least squares regression employed in data analysis revealed that while Petroleum profit tax had a negative and statistically significant effect on economic growth, Value Added Tax and Customs and Excise duties had a positive and statistically significant effect on economic growth in Nigeria. To the contrary, Company income tax was positive but insignificant for Economic growth in Nigeria. Further in the presence of improved government effectiveness Value added tax had a negative and statistically significant effect on economic growth in Nigeria, while Petroleum Profit tax was positive but insignificant for economic growth in Nigeria. The study recommends that the Nigeria government through the Nigeria tax authorities should take into consideration, existing market conditions as regards oil prices so that Petroleum exploring firms are not discouraged from undertaking oil exploiting activities in Nigeria,   Value Added Tax revenue and Customs and Excise Duties tax revenue should be used to finance provision of adequate infrastructur

Environment Quality in Nigeria: Implications for Poverty Reduction

Poverty in Nigeria is at extremely high levels and represents one of the many economic hardships faced by the Nigeria population. One of the factors potentially contributing to present high poverty levels is poor environment quality which is prevalent in Nigeria and which may result in increased poverty levels as efforts are undertaken to address adverse environment quality. This paper explored the effect of environment quality on poverty reduction in Nigeria using data from the World Bank World Development indicators over the period of 1990 to 2015. The study employed Augmented Dickey Fuller unit root test, and Autoregressive Distributed Lag (ARDL) estimation in analyzing data and the findings of the study revealed that improved environment quality as measured by improved access to sanitation and access to electricity positively and significantly increase poverty level in Nigeria, possibly on account of the increased financial and social costs of gaining access to sanitation and electricity. It is recommended that policy makers ensure that policies aimed at improving environment quality in Nigeria take into account the adverse implications of improving environment quality for poverty so as to ensure that a balance is achieved between improved environment quality and reduced poverty so that a cleaner environment is achieved at lower financial and welfare cost to citizens

Access to Electricity, Information and Communications Technology (ICT), and Financial Development: Evidence from West Africa

Poor Access to electricity may hinder West African countries from raising levels of financial development with the aid of Information communication Technology (ICT). Using 16 West African countries, and data over the period of 2000 to 2017, this present study analyses the effect of greater access to electricity on financial development through ICT. ICT was measured using mobile use and internet use, while financial development was measured using private bank credit to GDP ratio and Broad Money Supply to GDP ratio. Panel data fixed effect instrumental variables estimation was used for analysis and the study found that access to electricity significantly boosts mobile use and internet use, while resulting from access to electricity mobile use significantly boosted both measures of financial development but internet use significantly reduced the measures. Further categorizing sample countries into Anglophone and Francophone West Africa countries, access to electricity through ICT boosted both measures of financial development for Francophone countries, while only boosting broad money supply to GDP ratio for Anglophone countries. Thus greater access to electricity through for example provision of electricity infrastructure and regulation of electricity charges to households and firms is important to boost levels of financial development in West Afric

Carbon Emissions, Agricultural Output and Life Expectancy in West Africa

Carbon emissions are basically gaseous substances that are generated from human activities such as the burning of fossil fuels, into the atmosphere, and these emissions affect agricultural output and human health. The rising level of carbon emissions into the atmosphere has become a problem worldwide. Thus, this study examined the effect of carbon emissions on agricultural output and life expectancy in West Africa using data that spanned the period between 2000 and 2018. The study employed the two stage least squares econometric technique. The findings from the study revealed that a 1% increase in carbon emissions bring about a 3.818% reduction in agricultural output, that is, carbon emissions adversely affect agricultural output in West Africa. Also, a 1% increase in carbon emissions bring about a 0.123% increase in life expectancy, that is, carbon emissions boost life expectancy in West Africa. Therefore, this study recommends that the governments of the West African countries should formulate environmental policies that will help mitigate the adverse impact of carbon dioxide emissions on the agricultural sector, and also improve on healthcare delivery in the hospitals so as to reduce the mortality rate, this will help increase life expectancy in West Africa

Do Information and Communications Technology (ICT) and financial development contribute to economic diversification? Evidence from sub-Saharan Africa

Abstract This study based on a panel of 37 sub-Saharan Africa countries over the period of 2000–2019 explores the effect of a number of Information and Communications Technology variables namely fixed broad band, fixed line telephone, Information and Communications Technology good imports, internet, mobile, and secure internet servers, and financial development measured by private sector domestic credit to GDP on economic diversification as measured by a computed Herfindahl–Hirschman Index of economic diversification. Model estimation was performed using pooled ordinary least squares regression, panel data fixed effects regression, and generalized method of moments regression. The results from findings indicated that the Information and Communications Technology variables: fixed-line telephone, and ICT imports significantly reduced economic diversification, while internet and mobile were, respectively, insignificant for boosting economic diversification, and fixed broadband and secure internet servers were insignificant in adversely affecting economic diversification. As regards financial development, it was insignificant in boosting economic diversification of sub-Saharan Africa countries. The study recommended amongst others that individuals in sub-Saharan Africa countries should have improved access to Information and Communications Technology infrastructure and governments should ensure adequate provision of quality Information and Communications Technology infrastructure