Effect Of Financial Performance Research Articles

Role of financial openness in Ghana’s financial sector development episode

PurposeThis paper aims to reexamine the relationship between financial openness and financial development in Ghana.Design/methodology/approachThe study applied maximum likelihood estimation and autoregressive distributed lag approach and tested Granger causality using quarterly data from 1990:1 to 2020:4.FindingsThis study revealed a long-run equilibrium relationship between financial openness and development, indicating that financial openness is a critical factor in Ghana’s financial development. Therefore, the study recommends with caution that policies aimed at promoting financial openness could be an effective way to encourage sustainable financial development in Ghana, as financial openness alone may not bring the desired outcome.Research limitations/implicationsThe study contributes to the existing body of knowledge by providing empirical evidence of the link between financial openness and financial sector development in Ghana. Future research could delve deeper into the mechanisms through which financial openness affects financial development, exploring potential channels and transmission mechanisms.Practical implicationsThe findings suggest that policymakers, particularly the Ministry of Finance and the Bank of Ghana, should prioritize policies aimed at promoting financial openness. This includes continued efforts toward financial liberalization and creating an environment conducive to domestic and international financial transactions. Moreover, policies aimed at increasing trade openness, boosting real GDP and maintaining moderate real interest rates are essential for fostering financial sector development.Social implicationsEnhancing financial sector development can have significant implications for society, including increased access to financial services, improved economic opportunities and enhanced overall economic stability. By promoting financial openness and development, policymakers would contribute to poverty reduction, job creation and overall socio-economic development. The study bridges the gap between theory and practice by providing empirical evidence supporting the theoretical proposition that financial openness stimulates financial sector development.Originality/valueThis study fills a crucial gap in the literature on the effects of financial openness on Ghana’s financial sector development. It focuses on Ghana, which liberalized its financial sector in 1988 as part of the overall economic reforms in 1983, and this justifies the starting point of this paper in 1990, as there are no adequate data before 1990. The study uses principal component analysis to construct an index that measures financial development. The study considers the recent financial crises in Ghana in 2017 and underscores the importance of understanding the link between financial openness and financial development, which becomes useful for policymakers and researchers studying financial system development in sub-Saharan Africa which includes Ghana.

How does financial openness affect pollution emission of industrial enterprises?—Empirical evidence from the entry of foreign banks in China

AbstractCurrently, the effects of financial openness (FO) on the environment have not been assessed at the micro level of enterprises. This article uses the difference‐in‐differences method to explore the pollution abatement effect of FO. The results show that FO can effectively promote pollution abatement with a significant environmental performance enhancement effect. In addition, the pollution abatement effect of FO is stronger in large, heavy industrial, and state‐owned enterprises. Besides, FO significantly alleviates financing constraints and promotes the pollution abatement by driving R&D investment and strengthening the intensity of end‐of‐pipe treatment. Policy recommendations are given to steadily expand the FO pattern, improve the financial disclosure system of small and medium‐sized enterprises, and optimize subsidies for increased R&D investment to stimulate pollution abatement. A reference for other emerging economies, especially transitioning economies, is provided to fully utilize the financial system under construction or improvement to realize the value of pollution control.

Trade Openness, Financial Openness and Income Inequality: Empirical Evidence for MIST Countries/ Ticari Açıklık, Finansal Açıklık ve Gelir Eşitsizliği İlişkisi: MIST Ülkeleri için Ampirik Bulgular

Since the 1980s, income inequality has increased significantly in developed and developing countries. The literature has also seen studies that attempt to explain this rising trend in income inequality. Some studies explaining the increase in income inequality in various ways have focused on economic globalization. Questions on how the steps taken towards liberalization in international trade and finance and increasing market integration affect income inequality have been at the center of the discussions in these studies. Uncertainty about the direction and extent of the link between globalization and inequality persists primarily because of the conflicting empirical findings in the literature. This study aims to contribute to the literature by conducting an empirical analysis of MIST countries with data covering 1987-2019. The study's findings, which used panel data analysis to assess the data, showed that while trade and financial openness reduce income inequality for MIST countries over the analyzed period, foreign direct investments do the opposite. The results also showed that the effect of financial openness on income inequality is greater than the effect of trade openness. It is also discovered that the rate of per capita income increase has no statistically significant impact on income inequality.

How does financial openness affect economic growth at different stages of economies?

An area of debate in development economics is how financial openness affects economic development. In spite of considerable research, there is no consensus. This is because there are many financial openness indices, so the results are not robust to variations in the index, as discussed in Gräbner et al. (2021). Due to the possibility of different initial conditions, different levels of development, and/or different stages of transitions, the effect of financial openness could vanish without considering these factors. Therefore, this paper categorizes countries into stable countries (High-, Medium-, and Low-income countries) and transition countries (Transitioning to High and Transitioning to Medium income) based on World Bank Categorization. The results show that the effect of financial openness is positive for medium- and low-income level countries. However, it is not at a high-income level.

Pengaruh kinerja keuangan sebelum dan selama adanya pandemi Covid-19 terhadap harga saham pada laporan keuangan klub sepak bola

This study aims to analyze financial performance's effect on football clubs' share prices before and during the Covid-19. Financial performance in this study is measured by the profitability, liquidity and solvency ratio. This research will use quantitative research methods with secondary data sources in the form of archives of financial statements of football clubs listed on various stock exchanges and Public shares in 2019/2020 and 2020/2021. The analysis technique used in this study is a multiple linear regression analysis techniques. The results of this study show the results that the profitability ratio measured by Return On Investment, liquidity ratio is measured by Current Ratio and Cash Ratio, and solvency ratio measured by Debt to Assets Ratio and Debt to Equity Ratio have no effect and are not significant to the share price of football clubs both before and during Covid-19.

Fiscal dominance and exchange rate stability in Nigeria

This study investigates fiscal dominance and exchange rate stability in Nigeria. The period of investigation spanned 1981q1–2018q4, and the Structural Vector Autoregression (SVAR) technique was employed to test the fiscal dominance hypothesis and further examine the shock transmission effects of fiscal deficit components such as budget deficit and public debt on exchange rate movement in Nigeria. As a robustness, Autoregressive Distributed Lag (ARDL) technique was employed to analyse the shock transmission effects of these components on the movement of exchange rate in Nigeria. More so, granger causality test was conducted to trace the direction of causality among the fiscal deficit components and the exchange rates. The results show that budget deficit and changes in exchange rates in Nigeria have bi-causal relationship, while public debt could not granger cause exchange rate movement in the country. The SVAR estimates suggests that exchange rate movement in Nigeria reacted only to the shock effects of financial openness and the ARDL results indicate that both public debt and budget deficit have destabilizing effects on exchange rates in Nigeria.

Government Size and Openness: Insights Based on Country Classifications

This study investigates the nexus between government size and openness by paying special attention to country classification. The main results of our empirical investigations show that (i) there are two government size trends meaning two different country groups exist; (ii) there is a positive relationship between trade openness and government size for the first country group, which validates the compensation hypothesis; (iii) a negative relationship between financial openness and government size is found for the second country group, which confirms the efficiency hypothesis; (iv) the effect of financial openness is nearly ten times higher than trade openness; (v) an endogenous country classification process yields better results to understand the linkages between openness and government size. In this regard our study incorporates both hypotheses and provides a uniform explanation.

The influence of financial openness, trade openness, and energy intensity on ecological footprint: revisiting the environmental Kuznets curve hypothesis for BRICS countries.

This study aims to examine the impact of economic growth, financial openness, trade openness, and energy intensity on the ecological footprint of BRICS countries for the period 1996-2016 in the framework of the environmental Kuznets curve (EKC). In the research phases, the effects of financial openness and trade openness on ecological footprint were examined both individually and as a whole using three models. The results indicate that the EKC hypothesis is not valid in all BRICS countries. Specifically, the individual results demonstrate that the EKC model using financial openness is valid only for India, while the EKC model using trade openness is valid both for India and South Africa. Furthermore, financial openness has reduced environmental pollution in India and South Africa. Trade openness has reduced environmental pollution in China and India, while it has increased in South Africa. Lastly, energy intensity has increased environmental pollution in all countries except Russia for both models. Overall, policy-makers should develop policies to reduce energy intensity in BRICS countries.

Information asymmetry and the effect of financial openness on firm growth and wage in emerging markets

We examine whether the effect of financial openness on firm growth and wages depends on information asymmetry faced by foreign investors. We conduct a firm-year level panel regression analysis using 25 emerging market country panels for 1990–2011. We find that financial openness favors firms with lower information asymmetry (larger firms, cross-listed firms, export intensive firms), which grow faster than firms with higher information asymmetry. Further, financial openness leads to a widened wage difference between large and small firms. Finally, the asymmetric growth of large firms relative to small firms disappears as the information environment of the host country improves.

The impact of financial openness on the earnings of self-employed workers - an empirical evidence from a panel dataset

This paper contributes to the literature on the effect of financial openness by investigating the factors and determinants which drive the income share to self-employed labor during financial liberalization. The question of the precise impact of liberalization on the share of the self-employed has received less attention in the literature. The authors use a de jure or a rule-based indicator as a measure of capital account openness. The empirical work is applied for a panel dataset of 30 countries during the period of 1970 - 2015. The results from all specifications support the hypothesis that financial integration leads to an increase in the unemployment rate as well as in the income share of self-employed. Nevertheless, the positive relation between financial openness and self-employed income is not evident when we focus solely on developed countries.

Labor Market Institutions and the Effects of Financial Openness

We propose a new channel to explain why developing countries may fail to benefit from financial globalization, based on labor market institutions. In our model, financial openness in a developing country with a rigid labor market leads to capital outflow, and both employment and output fall. In contrast, financial openness in a developing country with a flexible labor market benefits the country. Our model suggests that enhancing labor market flexibility is a complementary reform for developing countries opening capital accounts.

Financial openness and entrepreneurship

Using a panel data set of 62 countries from 1995 through 2013, the effects of financial openness on changes in entrepreneurship rates in the economy are estimated for emerging and developed markets. Controlling for the effects of political risk in conjunction with capital controls, capital controls have a negative effect on entrepreneurialism in emerging market countries, but can have a positive effect on entrepreneurialism in developed markets. The imposition of financial controls have a greater effect in magnitude in developed markets than in emerging markets, indicating that development of the internal financial system plays a role in extenuating the effects of capital controls. The effect of the imposition of financial controls is not uniform across the various financial instruments. In particular, the imposition of capital controls on derivatives and real estate in developed markets is associated with a negative effect on entrepreneurialism, unlike for other financial instruments in developed markets. However, in emerging markets, the effects on entrepreneurialism of financial controls seems to be more uniform when controlling for the interaction of political risk and financial controls. In controlling for the effects of political risk on financial liberalization, the effects of financial controls between emerging markets and developed markets are not the same. In general, the imposition of financial controls in emerging markets is associated with a decline in entrepreneurialism, while the imposition of such controls in developed markets is associated with an increase in entrepreneurial activity.

FINANCIAL LIBERALIZATION AND STOCK MARKET EFFICIENCY: MEASURING THE THRESHOLD EFFECTS OF GOVERNANCE

This study takes the initiative to make a link between empirical aspect of an economy and theoretical part of it. Investigating econometric findings, the current study has taken advantages of profound analytical discussions to justify which school of thought describe liberalization phenomena and its relevant side effects. This paper presents an investigation into the effects of financial openness on stock market efficiency in emerging markets after controlling for certain level of institutional development. The results demonstrate that there is a threshold effect in the liberalization–efficiency relationship. Specifically, we found that the impact of financial liberalization on informational efficiency of the stock market was positive and significant only after a certain threshold level of institutional development had been attained. Below this level, the effect of financial liberalization on stock market efficiency was negative. This finding suggests that the positive effects of financial liberalization on informational efficiency are contingent on the level of institutional development, thus supporting the idea that financial liberalization embedded within a sound institutional framework has the capacity to enhance stock market efficiency. The conclusion that the governance concept, emphasized in econometric findings, is implicit in the definition of neoliberalism can be considered as one of the contributions of the study.

National and regional financial openness in China

While China’s economy has been subject to a wide range of economic reforms since 1978, its capital account is still restricted. The issue of capital account convertibility is widely debated both in China and by foreign observers. This study contributes to the understanding of China’s capital account by constructing new indices for China’s financial openness. First, we construct alternative indices, both of which suggest that China has experienced significant increases in its financial openness, albeit beginning at very low levels in the late 1970s. Then, we construct an index for financial openness at the provincial level from 2000. As expected, the eastern provinces exhibit much higher levels of financial openness than the provinces located in the central and western parts of the country. Taken together, these indices enable a clear overview of national and regional financial openness across time and are well suited for future studies on determinants and effects of financial openness in China.

Political Credit Cycles - Myth or Reality?

This paper tests the existence of political credit cycles, the positive co-movement between credit and elections. While support for this relationship has been found in some single-country studies, the link between electoral cycles and credit expansion has seen little exploration at the multi-country level. Using a comprehensive data set covering bank and non-bank credit in 165 countries from 1960 to 2013, we show that both government and private credit significantly increase in election years. This suggests the possibility that politicians use not only fiscal and monetary policy to court voters, but also implement credit market policies such as interest rate subsidies and tax breaks for debt to enhance credit growth. However, we find that a higher degree of financial openness weakens the frequency and magnitude of political credit cycles; yet the conditional effect of financial openness may be offset under the presence of institutional constraints on monetary and fiscal policy. Our findings are robust to different model specifications.

Financial Openness and Total Factor Productivity Growth

[enter Abstract Body]Using a panel data set of 89 countries from 1995 through 2014, the effects of financial openness, both in general and by direction of foreign capital flows, on changes in total factor productivity growth in the economy are estimated. An overall positive relationship is found between financial openness and total factor productivity growth. The positive effect of financial openness is driven by relaxation of capital controls on foreign inflows. and on the level of domestic capital market development, with the majority of the benefits falling to countries whose credit markets are less developed. For countries with developed capital markets, we document that at a certain level of development that financial controls on capital inflows and outflows can have positive effects on total factor productivity growth at differing stages of development.

Financial Openness, Financial Frictions, and Macroeconomic Fluctuations in Emerging Market Economies

ABSTRACTThis article develops an open economy DSGE model which takes into account the effects of financial openness and the associated financial frictions on macroeconomic fluctuations by introducing a modified version of interest parity. Evidence from the Chinese economy shows that the model provides a reasonable description of China’s financial openness and financial frictions during the sample period. Further evidence from comparative analysis shows that in most cases an increase in financial openness, usually accompanied by a decrease in financial frictions, leads to flatter volatility patterns with respect to domestic shocks but sharper volatility patterns in the presence of foreign shocks.

Intégration financière internationale et croissance économique dans les pays émergents et en développement : le canal du développement financier

Dans cet article, nous testons les implications de l’ouverture financiere sur la croissance de long terme via le canal du niveau de developpement financier. Notre travail se demarque de la litterature sur un certain nombre de points, notamment en etudiant le lien entre ouverture financiere, developpement financier et croissance a l’aide d’un modele a equations simultanees. A partir de la MMG sur panel dynamique, et pour 112 pays emergents et en developpement entre 1975 et 2007, les resultats montrent la presence d’un lien positif entre le developpement financier et la croissance de long terme. Contrairement aux resultats d’une abondante litterature etayant un impact positif de l’ouverture financiere sur le developpement financier, nous aboutissons a une conclusion plus nuancee. Celle-ci est robuste a l’introduction de la variable crises financieres. La nature de cet impact depend du choix de l’indicateur de developpement financier. Nos estimations concluent toutefois clairement et dans leur plus grande majorite a des effets negatifs importants de l’ouverture financiere sur l’activite des intermediaires financiers et le developpement des marches boursiers pour les pays emergents et en developpement. Les resultats pour le sous-groupe de pays emergents et frontiere se revelent plus concluants. Ils defendent sans ambiguite aucune une relation positive entre l’ouverture financiere et le developpement financier. Les resultats montrent enfin que le developpement financier presente un canal de transmission indirect par lequel l’ouverture financiere pourrait impacter le rythme de croissance de long terme.

Uneven effects of financial liberalization on productivity growth in the EU: Evidence from a dynamic panel investigation

This paper investigates the impact of the financial integration process on economic growth. Specifically, in analysing such growth effects, the distinction is made between two growth channels—investment and productivity. Crucially, the analysis tests whether the effects of financial openness on services differ from its effects on manufacturing. Based on a panel of sector-level data (manufacturing and services) from the EU KLEMS database (1980–2009), such effects are estimated in a dynamic panel setting. The main findings suggest that the productivity effects of financial integration, although positive overall, are uneven and they differ between the manufacturing and service sectors. More precisely, the results confirm that the manufacturing sector could profit from the process of global financial integration to a greater extent than services. But the impact of financial globalization on service sectors productivity remains overall positive. On the contrary, capital accumulation was broadly unaffected. Such results remain robust to different sensitivity checks regarding, most importantly, the measurement of financial integration. The findings of the lower productivity impact in services can be understood considering their more intensive skill-biased direction of technological change. At the same time, the strong capital-skills complementarity in services sustained the generation of positive expectations over future productivity growth and attracted financial resources from abroad. As an implication of this research and given the increasing importance of service sectors to modern economic systems, the focus should be placed on searching for more precise channels of long-lasting growth in services. (JEL: F02, F21, F36, F4)

Financial Openness and Technology Catch-up

This study analyses the effects of financial openness on productive efficiency and technology catch-up in four countries in the Basin (Algeria, Egypt, Morocco and Tunisia), as compared to a group of developed countries (France, Germany, Japan and the UK) over the 1985–2005 period. Using the stochastic production frontier with variable inefficiency approach (Battese and Coelli, 1995) and the metafrontier technique (Battese et al., 2004), we show that, with the exception of Tunisia, the productive efficiency of countries under consideration has continuously declined. We also identify an ever-widening technology gap for the South Mediterranean countries caused by among others, a slowdown in the opening-up of their financial markets starting from the second half of the 1990s.