Increase In Debt Research Articles

Effect of External Debt On the Financial Performance of Commercial Banks in Kenya (2008-2022)

This study analyses the impact of external debt on the financial performance of commercial banks in Kenya for the period 2008-2022. Employing descriptive, correlational, and inferential research designs, the study reviewed data from the Central Bank of Kenya, the World Bank, KNBS, and IMF on a quarterly basis. By employing the Augmented Dickey-Fuller test, ROE and external debt were further qualified to be stationary at first difference. The results highlighted by the Autoregressive Distributed Lag (ARDL) analysis indicated a statistically significant negative relationship between external debt and financial performance; the coefficients (-0.8998) confirmed that for every unit of increase in external debt, there would be a decline in ROE by 0.8998 units. The study establishes that external debt has been detrimental to the financial health of Kenyan banks due to the economic pressure it brings to the sector. For this purpose, it suggests that the government should avoid borrowing from external sources, and it has advised the development of measures that encourage overseas investors to invest in the country's banking sector. The policy of attracting FDI can enhance capital availability and alleviate the financial load on banking institutions. Relaxing regulations that restrict foreign investors would pave the way for this and help increase the bank’s performance, thus enhancing long-term economic growth.

Local Government Debt and Corporate Fraud: Evidence from China

ABSTRACT Local government debt acts as a double-edged sword for economic development. While it has effectively stimulated local economic growth, it has also led to crowding-out consequences of crowding out corporate financing and investment. This study analyzes data of Chinese listed firms from 2007 to 2020, revealing the detrimental effects of local government debt on firms’ misconduct. We find that local government debt is positively related to corporate fraud, and the results remain robust to a series of sensitivity tests. The mechanism tests demonstrate that an increase in local government debt exerts pressure on firms’ financing and performance. Moreover, we observe that the adverse effects are more pronounced in private firms, and firms with poor governance systems.

Towards Environmental Sustainability: The Impact of External Debt and Government Expenditure on Carbon Emissions in Somalia

This study aims to assess the effect of external debt and government expenditure on carbon emissions in Somalia. To do so, the study employed a rigorous econometric approaches such as autoregressive distributed lag model (ARDL), Fully modified least square (FMOLS), and Dynamic least square (DOLS). Findings demonstrated that external debt (LNED) positively and significantly affects carbon emissions. Results revealed that a 1%, or a point increase of external debt, rises 0.29% into the emitted emissions. Moreover, the study found that the long-run coefficient of government expenditure (LNGE) positively correlates with emissions. However, a 1% increase in total government expenditure significantly increases CO2 emissions by 0.05% in the long run. So, regarding the positive correlation between external debt, government expenditure, and carbon emissions, the study suggests that the government should strategically use its expenditures and external debt to fund environmentally sustainable projects. This approach aims to reduce carbon emissions while promoting sustainable development and balancing economic growth with ecological conservation.

Formas não proprietárias de morar ameaçadas: despejos e remoções em São Paulo durante a pandemia de COVID-19

From the perverse conjunction between an increasing social and economic crisis during the COVID-19 pandemic (2020-2022) — with rising unemployment, deteriorating incomes and increase of debt — and an unprecedent real estate boom, which caused a rise in land and rent prices, emerged new squats and an intensified number of displacements and evictions in São Paulo city, Brazil. However, the occurrence of displacement and evictions is quite invisible in the field of urban policies. This article presents the methods used by the Evictions Observatory to identify these processes, using cartography as a research method and analysis. By mobilizing data derived from different sources, we relate evictions to changes in real estate-renting dynamics that leads to the displacement of non-proprietary forms of living. We also investigated their relation with governmental plans, policies and projects which take on the role of incentivizing the market to produce new real estate products or offering rent as a service, in a context of increasing participation of real estate as financial assets and growing presence of asset managers and digital platforms in these markets.

Impact of Debt Composition and Accounting Conservatism on Financial Distress in Emerging Markets

Aims: This study investigates the impact of debt composition, specifically short-term and long-term debt, on corporate financial distress, focusing on the moderating role of accounting conservatism. It aims to understand how firms in emerging markets, particularly Kenya, can achieve financial stability through prudent debt structuring and conservative accounting practices. Study Design: The research adopted an explanatory research design. Place and Duration of Study: The study utilized financial data from firms listed on the Kenyan Securities Exchange between 2008 and 2021. Methodology: The study analyzed a sample of 45 firms trading at the Nairobi Stock Exchange over 14 years from 2008 to 2021. The study used panel logistic regression, a statistical method for analyzing data with multiple observations over time, to test its hypotheses. Results: The results show that both short-term and long-term debt increase the likelihood of financial distress, with accounting conservatism further intensifying the risk for firms heavily reliant on short-term debt while mitigating it for those with long-term debt. This suggests that conservative accounting practices, which promote early recognition of losses, may exacerbate financial distress for firms heavily reliant on short-term debt. In contrast, for long-term debt, accounting conservatism has a mitigating effect helping firms manage their debt obligations more effectively over time. This highlights a nuanced role of accounting conservatism, where it increases the pressure on firms with short-term debt while providing stability for those with long-term obligations. Conclusion: The findings suggest that corporate managers in emerging markets should carefully balance short- and long-term debt to minimize financial distress risks. Additionally, adopting conservative accounting practices can serve as a safeguard, providing early warning signals for financial trouble and enhancing corporate stability. Managers should therefore carefully balance short-term and long-term debt to reduce financial distress while adopting conservative accounting practices to enhance financial transparency and risk management. Policymakers can support firms by promoting responsible debt management and offering incentives for conservative financial reporting to strengthen overall financial stability.

EU-induced financialisation and its impact on the Greek wage share, 1999–2021

This paper examines the determinants of the income share of wage earners in the non-financial, private sectors of Greece since its introduction to the Eurozone in 1999. The main outcome of the integration of Greece into the Eurozone has been the financialisation of its economy, which has been particularly influential for households since it led to the rapid rise of household indebtedness. Building on recent research which shows that financialisation shape wage bargaining outcomes, we use quarterly data from the Eurostat and demonstrate that the relative size of the FIRE sectors and the increase in household debt have been negative drivers of the wage share in Greece over the last 22 years. Our findings also suggest that the employment-tied social benefits system and tertiary education provision have also been important determinants of workers’ income share.

Management of public financial debt in conditions of unbalanced supply and demand of energy resources

Financial debt management in the context of the energy crisis is an urgent problem that requires a strategic approach in countries with an unstable energy system. The imbalance between the supply and demand of energy resources generation creates a trap in which the growth of energy shortages leads to increased import costs, higher prices for end consumers and increased financial burden on the state. This, in turn, can provoke inflationary pressure, a decrease in the competitiveness of the national economy, an increase in public debt and social tension due to an increase in the cost of living and a decrease in the level of energy security. The research used the methods of scenario analysis, descriptive statistics, econometric, monographic and comparative analysis. The purpose of the article is to analyze the impact of energy crises on the state of state financial support, to determine ways to minimize risks and ensure financial stability. In the course of the study, the degree of influence of the imbalance of demand and supply of energy resources on the state financial debt was determined through the use of such tools as: analysis of market conditions, assessment of the level of demand and supply for energy resources. The paradigm of an integrated approach to the management of public debt in the context of energy crises is characterized, which is based on an integrated, multidimensional analysis and management of interrelationships between various economic, financial, social and political factors. It is emphasized that consideration of the energy sector should not take place in isolation, but in the context of its interaction with the financial capabilities of other sectors of the economy. Practical recommendations include risk assessment models related to energy crises and methods of stabilizing public finances, which can be used in the operational management of the state's financial debt. The method of integration and coordination of energy, economic, fiscal and social indicators is proposed for determining effective financial instruments and mechanisms for optimizing budget expenditures. It is concluded that in the conditions of imbalance of energy demand and supply, management of financial debt requires a strategic approach based on investments in clean energy, improvement of energy efficiency and accurate forecasting

Analisis Hubungan Politik Utang Indonesia dan China Untuk Menghindari Debt Trap Diplomacy

The analysis of the political relationship of Indonesia's debt to China to avoid debt trap diplomacy discusses the political debt relationship between Indonesia and China, particularly considering the intensive cooperation and debt assistance that China has provided to Indonesia, as well as the establishment of loan condition regulations that threaten the use of the state budget as a payment tool. This writing aims to understand the development of Indonesia's debt to China, whether Indonesia is trapped in a Debt Trap, and how Indonesia can avoid Debt Trap Diplomacy. This research employs a qualitative descriptive analysis method, utilizing previously published sources with data collection sourced from books, journals, and other online media such as websites, databases, and information available on the internet. Based on dependency theory, it shows that loan conditions with high interest rates and strict repayment terms reflect unfavorable lending conditions. The increase in debt to China for the Indonesian economy can stimulate the country's growth, but a significant economic dependence can also make Indonesia more vulnerable to Debt Trap Diplomacy. The research results indicate that based on the analysis of Indonesia's debt to China, there has been a tendency for an increase over the past five years. Indonesia is also still in a position of safe debt ratios, both by national and global standards, and does not fall into the category of Debt Trap Diplomacy. Several steps, approaches, and diplomatic efforts have also been undertaken by Indonesia to avoid Debt Trap Diplomacy.

30 Years of Macroeconomic Effects in Zambia-VECM, ARDL & IRF Approaches

Purpose: This study examines the impact of selected time series macroeconomic variables on Zambia’s economic progress for thirty (30) years (1992 to 2022) Methodology: The study employs the autoregressive distributed lag (ARDL), vector error correction models (VECMs) and the impulse response functions (IRFs) approaches. Findings: The VECM regression estimates indicate that in the long-run, ceteris paribus, a 1% increase in inflation and population growth rates cause a significant positive impact on economic progress of 0.36% and 0.68 % respectively whereas the total public debt stock causes decrease in economic growth of 0.45%. The ARDL long-run regression estimates indicate that ceteris paribus, a 1% increase in inflation and public debt significantly reduces real GDP by 0.2% and 0.03%, respectively, but a 1% increase in population growth rate increases real GDP by 23.11%. The IRF estimates show that a negative shock to the real GDP causes a mildly negative effect on the inflation rate, causes a significant positive increase in the population growth rate, which dissipates after 9.5 years and causes a significant positive increase in public debt, which dissipates after 10 years. Unique Contribution to Theory, Policy and Practice: Therefore, the study recommends that the Zambian government should prioritize repayment of the outstanding public debt by bringing down the debt-to-GDP ratio to sustainable levels, adhering to prudent public financial management and continuing to grow the domestic revenue base. The policies to promote population growth should be pursued cautiously because rapid population growth rates could erode the future economic growth prospects of Zambia.

Debt erosion: Asymmetric response to demand and supply shocks

This paper explores the effect of inflation supply and demand shocks on government debt for a sample of 32 advanced economies and 24 emerging markets from 1970 to 2022. The shocks are identified using a sign-restricted structural vector autoregression model with quarterly data. Estimations of dynamic panel regressions and local projections suggest that supply shocks lead to persistent increases in government debt, while demand shocks result in long-lasting declines. Furthermore, high debt levels amplify the impacts of both supply and demand shocks by more than three times. Specifically, supply shocks contribute to an increase in debt through elevated borrowing costs and prolonged depreciation, whereas demand shocks erode debt through persistent improvements in the primary balance, driven by increased revenues.

GOVERNMENT DEBT AND CRYPTOCURRENCIES: HOW BITCOIN IS CHANGING THE RULES OF THE GAME

In recent years, there has been a significant increase in public debt in many countries, which calls into question the sustainability of traditional financial systems. In this context, cryptocurrencies, especially bitcoin, are beginning to play an increasingly important role in the economy. This article explores the relationship between government debt and cryptocurrencies, focusing on how bitcoin can change the rules of the game in the financial world. We consider the mechanisms by which bitcoin and other cryptocurrencies can serve as an alternative to traditional financial instruments, as well as their potential as a means of protection against inflation and devaluation. In addition, the risks and benefits of investing in cryptocurrencies are analyzed against the background of growing government debt. The article also discusses the impact of regulation and government control on the development of the crypto market and its interaction with public finances. In conclusion, we hypothesize about the future role of bitcoin in the global economy and its ability to change the approach to public debt management.

Fiscal Policy’s Function in Reducing Economic Downturn

Fiscal policy drives a nation’s economic activity by taxing and spending by the government. It is essential for preventing economic downturns. Generally, it operates as follows: A rise in government spending Business and consumer spending typically decreases during recessions, which lowers the economy’s total demand. The government can spend more on infrastructure, services, and public initiatives to make up for this. Quick economic stimulation results in more demand for goods and services as well as the creation of jobs. Tax Rebates: Lower taxes generate more cash for businesses and consumers alike. More money is available for both individuals and companies to invest in and expand their businesses. It is possible to counteract the drop in private sector demand by increasing spending and investment. Transfer Payments: The government may also raise transfer payments to pay for social security, unemployment insurance, and other welfare programs. These payments shield the purchasing power of those who are adversely affected by the recession and aid in stabilizing the economy. Automatic Stabilizers: Without the need for new legislation, some components of fiscal policy automatically promote economic stabilization. For instance, lower-class and impoverished households benefit from automatic stabilizers that reduce taxes in reaction to slower economic development and falling revenues. Unemployment insurance and progressive income taxes are two instances of these stabilizers. As a result, aggregate demand is sustained. Debt and Budget Deficits: During a recession, the government may have a budget deficit if expenditure exceeds revenue. This may lead to an increase in the national debt, but this is typically justified as a benefit to the economy. The theory is that the economy will eventually recover from the short-term debt increase due to the stimulus’s long-term impacts, improving the country’s financial situation. The Multiplier Effect: The economy may be impacted in a number of ways by the government’s increased expenditure and tax incentives. For example, when the government funds a new infrastructure project, the workers employed to complete it spend their earnings on goods and services, increasing demand and economic activity as well as the profits of themselves and other firms. Generally speaking, the goal of fiscal policy is to boost the economy during recessions in order to lessen their severity and hasten their recovery.

Government debt and economic growth: heterogeneity, asymmetries, and the role of net debt

ABSTRACT Using data on 167 countries over 1970–2019, this study gathers new evidence about the government debt-growth relationship. We jointly address several features of the panel – foremost asymmetry, cointegration, endogeneity, country heterogeneity and cross-sectional dependence. We find that increases in per-worker debt are detrimental to the long-run dynamics of output, but our nonlinear estimates suggest that changes in government debt propagate their effects through different channels. Applying alternatively gross and net public debt as a measure of indebtedness yields different results too, as happens with the adoption of different estimators. The magnitude of the effects depends on the model specification, indicating that cross-country estimates of the debt-growth nexus require parsimonious interpretations.

Impact of Firm Size and Capital Structure on the Profitability of Nepalese Commercial Banks

The study examines the impact of firm size and capital structure on the profitability of Nepalese commercial banks. Return on equity and return on assets are selected as the dependent variables. The selected independent variables are debt to equity ratio, debt to assets ratio, capital adequacy ratio, loan to deposits ratio, assets tangibility and firm size. The study is based on secondary data of 13 commercial banks with 104 observations for the period from 2014/15 to 2021/22. The data were collected from Banking and Financial Statistics published by Nepal Rastra Bank, publications and websites of Nepal Rastra Bank (NRB) and annual reports of the selected commercial banks. The correlation coefficients and regression models are estimated to test the significance and importance of firm size and capital structure on the profitability of Nepalese commercial banks. The study showed that capital adequacy ratio has a positive impact on return on assets. It means that increase in capital adequacy ratio leads to increase in return on assets. Likewise, debt to equity ratio has a negative impact on return on assets and return on equity. It means that increase in debt-to-equity ratio leads to decrease in return on assets and return on equity. Further, this study showed that assets tangibility has a positive impact on return on assets and return on equity. It means that increase in assets tangibility leads to increase in return on assets and return on equity. Moreover, firm size has a positive impact on return on equity. It indicates that increase in firm size leads to increase in return on equity. Similarly, debt to assets ratio has a positive impact on return on equity. It means that increase in debt to assets ratio leads to increase in return on equity.

Debt shocks and the dynamics of output and inflation in emerging economies

This paper empirically examines the impact of public debt shocks on output and inflation in 34 emerging market economies (EMEs), using panel local projections over the period 2000 to 2022. The estimated results show that real GDP falls significantly after an unanticipated increase in public debt while inflation rises. We also examine whether fundamental characteristics across EMEs could affect the impact of public debt shocks. The results also suggest nonlinearities in the dynamics, where higher initial debt levels, tighter domestic financial conditions, and lower income levels amplify the negative responses of real GDP, while tighter global financial conditions dampen the negative impacts of debt shocks. For inflation, the responses vary depending on economic-specific characteristics.

Local Debt and Social Welfare in China: Evidence from Zhejiang and Anhui

Currently local government debt is a major concern for all sectors of society, but there is still a debate about the relationship between local government debt and social welfare. This paper addresses the question of the impact of local debt and social welfare in China, using a case study of data from Zhejiang and Anhui from 2014-2019 to qualitatively analyze the impact of local debt and social welfare in four dimensions: consumption, infrastructure, education, and health. The results found that: first, the growth of local debt has an inverted U-shaped impact on residents' welfare, which is manifested in the fact that before the size of local debt reaches the critical value, the increase of local debt can enhance social welfare, but after exceeding the critical value, the increase of local debt makes social welfare decline; second, in terms of sub-welfare index factors, there are different correlation degrees between different factors and the indicators of local debt, and thus have different characteristics of development at different stages are characterized by different developments.

The Effect of Capital Structure On Company Value with Profitability and Dividend Policy as A Mediating Variable

The theory of capital structure with taxes is put forward by stating that the value of a company increases as the total debt increases. The use of debt in the company's capital structure, on the other hand, also incurs costs that can reduce the value of the company, so Modigliani and Miller (1963) the trade-off theory reveals that there is a so-called optimal capital structure. This study aims to test and analyze the influence of capital structure, profitability, and dividend policy on company value, both directly and indirectly. The population of this study is pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange for the period 2008-2022. The sampling technique used was the purposive sampling technique and samples were obtained from 6 companies with a total of 90 years of observation. This study uses secondary data in the form of annual financial statements of pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange for the 2008-2022 period. The data analysis technique in the study uses the dynamic panel method of the system generalized method of moments (GMM) with the Rstudio application. The results of the analysis provide evidence that capital structure, profitability, and dividend policy have a significant positive effect on the company's value. Capital structure has a significant positive effect on profitability and dividend policy. Capital structure affects the value of the company through profitability as a mediating variable. Capital structure affects the value of the company through dividend policy as a mediating variable. Company management is advised to always maintain an optimal capital structure for the company so that it can increase profitability and dividend distribution so as to increase the company's value. For the next researcher, it is recommended to increase the number of research samples so that the research results can be generalized widely.

Fiscal rules and economic cycles: Quality (always) Matters

This paper investigates the role of fiscal rules in managing public debt, particularly focusing on their efficacy during different phases of economic cycles. Analyzing Balance, Expenditure, and Debt Fiscal Rules, the study finds that their impact on debt reduction is significantly influenced by the quality of the fiscal framework and the economic cycle phase. Moreover, factors like legal basis, procedural framework, and political stability are identified as key to ensuring compliance with fiscal objectives. Our results suggest that fiscal rules are most effective in reducing debt during positive economic cycles, with the design and institutional support playing a crucial role. This has important policy implications, particularly in the context of the debt increase after the Covid-19 pandemic.

Driving A-loan: Automobile debt, neighborhood race, and the COVID-19 pandemic

COVID-19 altered travel patterns in the U.S. Studies have analyzed the effect of the pandemic on travel mode, including working from home, but few have focused on automobile ownership—a relationship with potentially long-term consequences for accessibility, household budgets and debt, and policy efforts to meet climate goals.To understand the association between the pandemic and automobile ownership, we rely on a unique credit panel dataset from Experian and examine three different automobile loan-related outcome measures: annualized growth rate of new automobile loan balances, average new loan size, and the number of new loans. We focus specifically on changes across loans in neighborhoods by race/ethnicity, hypothesizing larger increases in automobile debt in Black and Latino/a neighborhoods, where workers are less likely to be able to telework. The annualized growth rate of new automobile loans increased during the pandemic across all neighborhoods by race/ethnicity, increasing most rapidly in Latino/a neighborhoods. Controlling for other factors, loan size increased similarly across neighborhoods by race/ethnicity. The increase in automobile lending in Latino/a neighborhoods, therefore, likely was explained by a significant uptick in the number of new loans.The growth in automobile lending during the pandemic was potentially prompted by pandemic-induced changes in the need for automobiles and facilitated by an expanded social safety net. As the pandemic and its various forms of public financial assistance recede, the findings underscore the importance of ongoing assistance in enabling automobile ownership or shared access among households with limited means whose livelihoods depend on the access that vehicles provide.

Educational Debt and Income Among Pharmacists and Other Health Professionals

ObjectiveGiven the substantial increases in student educational loan debt in recent years, the objective was to assess trends in educational debt-to-income ratios for graduates of pharmacy, medicine, dentistry, optometry, and veterinary medicine programs in the United States in the 2017–2022 period. MethodsA retrospective analysis of 2017–2022 data for educational debt and income for select health professions was conducted. Annual income data were collected from the American Community Survey, and educational debt data were collected from health professions organizations. Educational debt-to-income ratios for each health profession were calculated, as was the mean change per year in debt-to-income ratio. ResultsWith the exception of medicine, educational debt consistently exceeded income across the selected health professions in the 2017–2022 period. Debt-to-income ratios of pharmacists and the remaining health professionals decreased on average per year between 2017 and 2022. Physicians had the lowest debt-to-income ratios and dentists had the highest debt-to-income ratios in the study period. ConclusionDebt-to-income ratios fell below the 2017 levels for the health professions of interest, suggesting that average growth in income outpaced that of debt for the study period. Regardless, debt remains high and may influence health care professionals’ postgraduate training and career decisions, and in turn affect access to health care. Therefore, a call to action is proposed to address educational debt burden. Several strategies are suggested, including federal policy changes, implementing tuition reductions or minimal increases, facilitating financial aid options, and reducing underlying costs of health professions programs.