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Bank Credit and Growth of the Manufacturing Sector Nexus in Nigeria: An ARDL Approach

Author(s): Michael S. Ogunmuyiwa,Babatunde Adekunle Okuneye,Joseph Nwabueze Amaefule / Language(s): English Issue: 02/2017

Bank loans and credits play a significant role in the development of the manufacturing sector of any country. Most manufacturing concerns in developing countries with particular reference to Nigeria heavily depend on bank loans to nurture their businesses to the next level. Sequel to this, the paper examines the impact of bank credit on growth of the manufacturing sector in Nigeria. Time series data from the return to democratic rule in 1999 to 2014 were fitted into the regression model using econometric techniques particularly the Augmented Dickey-Fuller (ADF) test and the Autoregressive Distributed Lag (ARDL) model. Empirical findings show that bank credit to the private sector has a positive impact on the manufacturing sector. Albeit, a significant impact was found between bank credit and manufacturing sector’s growth, the policy implication of this finding is that bank credits drive manufacturing output in Nigeria. Hence, monetary policy instruments should still be targeted towards allocating more credits to the private sector in order to fully achieve the desired objectives of boosting the output of the sector as well as providing a lead way for the attainment of the desired economic growth and development.

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Testing the Validity of Purchasing Power Parity in the BRICS: Further Evidence

Author(s): Emmanuel Numapau Gyamfi / Language(s): English Issue: 02/2017

The study re-investigates the validity of purchasing power parity (PPP) for Brazil, Russia, India, China (PR) and South Africa. These countries trade amongst themselves and are known as BRICS. We test if nominal exchange rates and relative prices are cointegrated for these countries and also find out if the cointegration is of linear or nonlinear form. A rank test for cointegration and a score test for nonlinearity are employed in our analysis. Our results failed to reject the null of no cointegration between nominal exchange rates and relative prices for all the five countries, however, there is cointegration between nominal exchange rate, CPI for China (PR) and CPI for US. Further analysis shows that the long-run relationship between nominal exchange rate, CPI for China and CPI for US is nonlinear. The results imply that we cannot use PPPas a basis in determining the equilibrium exchange rates for Brazil, Russia, India and South Africa because of the existence of arbitrage opportunities which traders are likely to exploit, however, it is difficult to make unbounded gains from arbitrage in traded goods in China (PR). The study provided new evidence on the validity of PPP in the BRICS by the use of nonlinear cointegration rank and score test.

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Feasibility of Monetary Union in the SADC and EAC: Evidence from Business Cycle Synchronisation

Author(s): Ephrem Habtemichael Redda,Paul-Francois Muzindutsi / Language(s): English Issue: 02/2017

Through the Association of African Central Bank Governors, in 2003, Africa committed itself to work for a single currency and common central bank by 2021. In pursuit of this grand objective, many regional trading blocs including the Southern African Development Community (SADC) and the East African Community (EAC) are involved in various economic integration activities. Forming a monetary union is a serious endeavour that needs serious and deliberate consideration. Sufficient and sound economic basis, such as similar economic structures, should be in place. The purpose of this paper was to assess the feasibility of monetary union in the SADC and EAC by determining the similarities of the economic structures in the regions through business cycle synchronisation. This study uses annual real GDP of each country in the two regions for a period of 30 years. The results of correlation analysis and T-Y Granger causality test suggest that there is overwhelming lack of business cycle synchronisation in the two economic regions, suggesting that it is not feasible to form a monetary union in these two economic regions as envisaged in the time frame. The two economic regions, therefore, need to set and coordinate major macroeconomic policies to harmonise and achieve sustainable economic development goals in their respective regions.

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The Causes of the Fluctuation in the Exchange Rate in South Africa

Author(s): Noluthando Qwelani,Akeem Adewale Oyelana / Language(s): English Issue: 01/2018

This study uses the OLS estimation method to analyze the factors that determine exchange rate variation in South Africa. Two groups of explanatory variables are used: the first group comes from extant empirical studies and the other group consists of new variables. The analysis of existing variables reveals that the variables are individually and jointly insignificant. The explanatory variables used in the regression include Gross Domestic Product, Consumer Price Index and Inflation Rate. Quarterly data for these variables are used in the estimation. The second regression uses the following explanatory variables: South Africa’s Foreign Reserves, South Africa’s Total Money Stock, South Africa’s Prime Overdraft Rate and the USA Interest rate. According to the results, all the variables but one (South Africa’s Foreign Reserves) are found to be statistically significant. The coefficient of determination was remarkably higher than the one obtained from the first regression. The study calls for the South African policymakers to increase the interest rate in order to reverse the adverse effects of steady depreciation that has been experienced in the exchange rate recently.

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Determinants of Credit Risk in the European Banking Sector

Author(s): Ioan Trenca,Daniela Bozga / Language(s): English Issue: 01/2018

The purpose of this article is to determine the factors that influence the credit risk and the quality of the loan portfolio. Among them are the capital adequacy, GDP, unemployment rate, inflation rate, government debt and financial crisis. For this purpose we developed a panel consisting of 70 commercial banks from 13 European high income countries (Austria, Belgium, Cyprus, Germany, Greece, Italy, Norway, Poland, Portugal, Spain, Sweden, Denmark and Switzerland). The period analyzed in this study is Q12005: Q42011. The quality of the loan portfolio is determined as a ratio between: Loan reserves (allowance for loan losses) and Total loans.

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Modelling Return Volatility in the Main Board and the Alternative Exchange of the Johannesburg Stock Exchange: Application of GARCH Models

Author(s): Katleho Makoko,Paul-Francois Muzindutsi / Language(s): English Issue: 03/2018

Volatility has been a major concern for the stock market because it poses risk challenges to stock markets’ investors. This paper estimated and compared the level of volatility in the two boards of the Johannesburg Stock Exchange (JSE) namely, the Main Board and the Alternative Stock Exchange (AltX), in order to establish whether there are volatility spill-over effects between these two boards of the South African stock market. Different GARCH models were used to analyse daily returns for the sample period running from January 2007 to December 2016. Results found that the best volatility capturing model for the JSE Main Board was EGARCH; while the best model for AltX was GARCH (1, 1). The JSE AltX was found to be more volatile than the Main Board and there was no spill-over effect between the two boards. The absence of the spill-over effect is an indication that the risks do not spill-over between the two boards of the JSE. The findings of this study therefore suggest that investors can minimise risk by diversifying their investment between the two major boards of the JSE.

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Dynamic Adjustment towards a Target Bank Capital Structure: South African Evidence

Author(s): Athenia Bongani Sibindi / Language(s): English Issue: 03/2018

Banks financing decisions remain an enigma, increasingly attracting the attention of banking regulators and corporate finance scholars alike. This article sought to establish whether banks seek to achieve a target capital structure in their financing decision making and if so at what speed of adjustment (SOA) do they gravitate towards this target? Utilising a sample of 16 South African banks for the period 2006-2015, we employed panel data techniques to determine whether banks have a target capital structure that they quest for. A partial adjustment model was estimated using the LSDV with Kiviet (1995) correction estimator which controls for cross-sectional dependence and to determine the speed of adjustment towards this target. Robustness checks were also conducted to establish whether the SOA is dependent on the source of financing used. The results documented that South African banks have a target capital structure which they quest for, and adjust to this target at a SOA of 44% or a half-life of 2.4 years which is relatively faster to that of non-financial firms. These findings relegate capital regulations to be of secondary importance in the determination of bank capital structure. At worst bank capital regulations might not be binding at all.

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BİST Endekslerinin Şoklara Kısa-Dönemli Tepkisi: Bir Makro Analiz

Author(s): Ali Ulvi Ozgul,Ibrahim Korkmaz Kahraman / Language(s): Turkish Issue: 1/2019

This research, which takes stock market index data as input in contrast to De Bondt and Thaler’s (1985) classical approach for testing overreaction hypothesis on a micro scale via individual stocks, is aimed at analyzing reactions of the market in aggregate and portfolio groups, which are represented by indexes. The shock-filtering procedure is based on 50-day window, encompassing observations from 60 days to 11 days prior to an observation as suggested by Lasfer et al. (2003) while volatility has been estimated through Exponentially Weighted Moving Average (EWMA) method. Indexes resembling each other and significantly differing from others in terms of their reaction on the day of shocks, which are detected by a different threshold have been determined. The analysis implemented separately for two subperiods outputs findings which support the validity of underreaction on all indexes except XUSIN within 2000-2008, in line with the reference researches on indexes. This result is, however valid only for positive shocks. The cautious behavior against good news disappears in the second subperiod (2009-2018). This variation can be regarded as a sign of our market’s progress in terms of information efficiency. Putting forth no significant over or underreaction of indexes to shocks, this paper shows results in compatible with the Efficient Market Hypothesis (EMH) which asserts just and timely reactions to shocks.

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The Impact of Corporate Cultural Behaviour on Common Stock Return: Some Implications for Corporate Governance

Author(s): Chamil W. Senarathne / Language(s): English Issue: 80/2018

This paper examines the relationship between common stock return and corporate cultural behaviour of twenty listed firms from Shanghai Stock Exchange. The particular research questions of this study include: whether corporate cultural behaviour impacts common stock returns and under what conditions it impacts shareholder expectations and corporate governance.

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The Effect of Financial Ratios on the Stock Prices: Evidence from the Polish Stock Exchange

Author(s): Marie Ligocká / Language(s): English Issue: 1/2019

Stock prices can be influenced by many factors; the macroeconomic factors, industrial specifics and company characteristics are three main categories. The object of this paper is to analyze relationship between selected financial ratios and stock prices of the food,energy, metallurgical and chemical companies listed on the Polish Stock Exchange (Giełda Papierów Wartościowych w Warszawie, GPW) over the 2006–2015 period. The Johansen test that investigates long-term equilibrium between stock prices and financial ratios is used. The short-run dynamics of the long-term equilibrium relationship will be examined using the Vector Error Correction Model (VECM). The panel regression method that analyze relationships between data set in two-dimensional space follows. The findings indicate the impact of the rentability, the liquidity and the financial leverage to the selected stock prices of companies listed on the GPW.

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Correlation Between Credit Rating and Macroeconomic Indicators

Author(s): Snježana Brkić,Velma Pijalović,Elma Pjanić / Language(s): English Issue: 3-4/2016

Credit rating, as one of country risk indicators, plays an exceptionally important role in international capital markets – for credito rs and investors as much as countries, industries a nd companies which require loans and investments. It i s connected with a wide range of different factors, both of economic and non-economic nature. The goal of this paper is to provide insight in trends of credit ratings of South-East European countries and to compare their ratings, bringing them into relation with macroeconomic situation of given coun tries. The research takes into account ratings provided by three the most significant rating agenc ies – Standard & Poor's, Moody's and Fitch, as well as eight macroeconomic indicators, for Albania , Bosnia and Herzegovina, Montenegro, Croatia, Macedonia and Serbia in period between 2007 and 201 4. Results of this research have shown that credit ratings of these countries ranged within the non-investment speculative grade. Croatia has the highest credit rating, followed by Macedonia, then Serbia and Montenegro, while B&H scores the lowest. Trend of the credit rating often does not s ufficiently match the macroeconomic situation of th e countries observed through main macroeconomic indic ators. By using scatter diagrams and Spearman’s rank correlation coefficient, it has bee n discovered medium strong positive correlation between credit rating on one side and gross domesti c product, external debt and exports, on the other side, while correlation with other analysed macroec onomic indicators has been extremely low.

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Stress Testing Tool in Banking Risk Management

Author(s): Miodrag Džodžo / Language(s): English Issue: 3-4/2016

n the Paper, the basic types of bank stress tests will be showed as examples from the practice of a relatively small bank in Serbia with assets of less than a hundred millions euro’s. The tool is shown in two types of stress test (scenario of analysis and sensitivity test) with examples. Subject of the article is relevant to the problems that global economic crisis deeply affected and still affecting the Serbian banking sector. Crisis is prolonged and emphasizes the importance of more sophisticated tools and methods for risk management in financial institutions, especially those tools and methods dealing with the elaboration of sudden negative circumstances that could dangerously affect banks. According to extent of the crisis, bank management should envision possible situations and early signals to indicate any possible losses in future period. Special attention should be focused on actions of regulatory bodies in the forms of obligatory executions of complex and comprehensive stress tests. Stress tests are performed for banks individually and on level of national financial system. This article shows how relatively small changes in business environment can deeply affect a financial institution.

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Mobile Technology as Part of Banks’ Business Model

Author(s): Monika Klimontowicz,Janina Harasim / Language(s): English Issue: 340/2019

During the last few decades, the banking market has changed significantly making banks face new challenges. Mobile technology development has had a powerful impact on all human activities including banking. Mobile technology has changed both the information and communication sharing, as well as customers’ market behaviour. All these changes should be taken into account in the process of searching for competitive advantage factors and designing banks’ business models. The purpose of the paper is to propose the framework for banks’ business model that incorporates using mobile technology and creating a competitive advantage. The foundation of this framework is based on theoretical considerations. The paper analyses contemporary business models used by banks, their value proposals and their relation to customers’ needs and expectations. The research highlights the routes for using mobile technology in the further development of banks’ business models from the perspective of the process of creating and delivering value for customers.

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Verification of “Too Much Finance” Hypothesis in Central and Eastern European Countries – Empirical Research

Author(s): Wojciech Grabowski,Iwona Maciejczyk-Bujnowicz / Language(s): English Issue: 340/2019

This paper analyses the relationship between the domestic credit to GDP ratio and economic growth in a group of 11 countries in Central and Eastern Europe. The parameters of the econometric model used, were estimated using a pooled regression method and the Blundell‑Bond systemic estimator. The results of our empirical investigation show that the entire group can be divided into 3 homogeneous sub‑groups with different values of the optimal level of domestic credit to GDP ratio. Estimation of the parameters with the use of a panel model show that Latvia, Lithuania, Estonia and Slovakia would probably have reached a higher level of economic growth if the analysed coefficient had been at a level of 0.48. In the case of the sub‑group encompassing Poland, Czech Republic and Hungary, the optimal value of the analysed coefficient turned out to be 0.6. In the case of the Bulgaria, Croatia and Romania sub‑group, the development of the financial system, which is represented in this article by the ratio of domestic credit to GDP, does not seem to have any impact on the rate of growth of real GDP.

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Perception of the Effectiveness of Stock Market Recommendations in Relation to Their Real Marketability

Author(s): Jakub Keller / Language(s): English Issue: 340/2019

The purpose of this paper is to evaluate the effectiveness of stock market recommendations as a factor supporting investment decisions, both in objective and subjective terms. The applicative objectivity of using recommendations is visualized by indicating their real impact on achieving an above‑average return. Subjective utility refers to the perception of recommendations directly by their recipients, including individual investors. For this purpose, a survey was conducted on a group of 564 respondents whose structure is representative of stock market investors in Poland and the results of the survey were verified by conducting statistical analyses (logit models) on the example of selected brokerage houses indicated by investors as the most and least effective in the prediction. The analyses conducted show an ambiguous perception of stock market recommendations by investors. According to investors, the usefulness of stock recommendations issued by individual brokerage houses varies, resulting in different possibilities of generating income using these reports. The responses of respondents to the objective results of investment models using information from stock market recommendations also indicate that individual perceptions of investors’ recommendations do not necessarily translate into their actual usefulness.

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Ujawnianie informacji w świetle Międzynarodowych Standardów Rachunkowości i jego wpływ na obszerność sprawozdań finansowych grup kapitałowych notowanych na GPW w Warszawie

Author(s): Piotr Prewysz-Kwinto,Grażyna Voss / Language(s): Polish Issue: 340/2019

The changes in economic reality have a direct impact on accounting standards, which adopting to these changes, require entities to disclose more and more information. This causes an increase in the length of financial statement, but at the same time does not necessarily translate into an improvement in their quality and usability. This paper presents the most important aspects of disclosure in financial statement based on international accounting regulations and main problems related to this process. The results of the own study on disclosure in financial statement of the largest capital group listed on the Warsaw Stock Exchange and their impact on the length of prepared financial statements, were also presented and constitute the most important part of this paper.

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The Bank Lending Channel of Monetary Transmission in Turkey

Author(s): Neslihan Turguttopbas / Language(s): English Issue: 2/2019

In this paper, it is aimed to fill a gap in the literature by providing empirical evidence on the influence of monetary policy of Central Bank of Turkey on bank lending in Turkish financial system. In the analysis, the bank level data consisting of 20 banks and monthly market interest rates are used for the period 2001-2017. The findings of the study address three different perspectives of transmission of monetary policy rates. Firstly, the effect of the policy rate on bank lending rates is evaluated and it is confirmed that a change in the policy rate has been reflected in banks’ lending rate with 3 months lag. The second group of findings report that the monetary policy affects banks' lending rate in Turkey mainly through its effects on the deposit rates with a lag of 2 months. The third perspective focuses on the balance sheet channel of monetary policy transmission. The results indicate that mainly the policy rate of central bank and liquidity level affect the supply of bank loans. Each of the variables of the adequacy of bank capital and ROA affects the bank’s supply of the loans. Amongst the economic variables, the GDP growth has a positive and significant and stock exchange index has negative and significant relation with the supply of bank loans.

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Evaluating the Customer Satisfaction’s Effect on Murabahah and Mudarabah Financing in Islamic Banking

Author(s): Bashir Baba,Shafie Mohamed Zabri,Ahmed Kaseri Ramin / Language(s): English Issue: 01/2019

There are a considerable number of studies on the service quality dimensions of banking industries, but little researches were carried out on the product quality dimensions, and this led to the minimal understanding of the impact of product quality dimensions from the customers’ standpoints, This research sought to identify the impact Islamic banking products (Murabahah and Mudarabah) dimensions on customer satisfaction. The study surveyed Islamic bank customers (users of the Islamic bank’s products in Nigeria) using questionnaires to seek responses, a convenient sampling technique was conducted to reach out to customers, and the use of PLS-SEM 3 was employed for the analysis of the data. The result model shows an R2 value of 0.414 (for Murabahah), which means 41 % of the variance in customer satisfaction is explained by the exogenous constructs of perceived quality, cost, convenience and compliance of Murabahah, and R2 value of 0.309 (for Mudarabah) which means 31 % of the variance in customer satisfaction is explained by the exogenous constructs of perceived quality, cost, convenience and compliance of Mudarabah. The values of R2 for Murabahah and Mudarabah show that the constructs were moderate in determining the satisfaction level of customers as they produced 0.414 and 0.309 respectively.

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Exchange-traded products in Germany: development and substitution of exchange-traded funds, exchange-traded commodities and exchange-traded notes

Author(s): Adam Marszk / Language(s): English Issue: 4/2018

Research background: Exchange-traded products (ETPs) are one of the most rapidly growing categories of financial products. Their fast development has been boosted by innovative features. Three main categories of ETPs are exchange-traded funds (ETFs), exchange-traded commodities (ETCs) and exchange-traded notes (ETNs). ETCs and ETNs remain least known, even though their number on some stock exchanges is high. In Europe, Germany is one of the largest and most active ETPs markets. ETCs and ETNs are debt instruments, in contrast with the most popular ETFs, which are equity securities. Therefore, they offer investors different advantages, but also expose them to other types of risks. Purpose of the article: The key aim of the article is to present the features of ETPs and to provide in-depth insight into the issues linked with the development of ETPs market in Germany, with the special emphasis on the ETCs and ETNs. Methods: In the main empirical part of the article, German ETPs market is analyzed using descriptive statistics and technological substitution framework (employed for the analysis of innovations in order to evaluate the changing market shares of, first, ETFs versus ETCs and ETNs, as well as, second, ETFs versus other types of investment funds). The period of the analysis is 2010–2016 in the former case and 2007–2016 in the latter. Findings & Value added: Share of ETPs other than ETFs in the total market in Germany remains low. Even though the market position of the leading products, i.e. ETFs, is still very strong, some substitution has been observed, especially after 2015. Predictions indicate that this trend will continue in the upcoming years. The results of the analysis of the investment funds’ market confirm the substitution between ETFs and traditional investment funds over 2007–2017, in particular in the first years of this time period.

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RELATIONSHIP BETWEEN CASH FLOW MANAGEMENT AND FINANCIAL PERFORMANCE OF COMPANIES LISTED ON THE TEHRAN STOCK EXCHANGE

Author(s): Majid Ramazani,Mahdi Salehi,Mahmoud Laridashtbayaz / Language(s): English Issue: 17/2018

Purpose–Cash is one of the most important assets to business firms. To evaluate a business firm, the competencies of a firm in creating and increasing the cash are of great importance for investors, creditors, and other beneficiaries. So, the main objective of the current study is to evaluate the relationship between cash flow management and firm financial performance in Iran. Design/methodology/approach – In the present study, using the data of 155 companies listed on the Tehran Stock Exchange during 2009-2016, panel data, and multivariable regression, we tried to analyze the relationship cash flow management and financial performance. Findings –The results obtained indicated that there is a relationship between the decrease (increase) of cash conversion cycle and operational cash conversion cycle and the improvement (debilitation) of financial performance. Moreover, the pending period for collection of sales revenue, cash conversion cycle, and operational cash conversion cycle is the Granger Cause of return on assets. Originality/value – Since a few studies have been conducted on cash flow management in Iran, the current study has covered the topic in Iran..

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