High Debt Research Articles

Tax policy cyclicality and financial development

This paper adds to the existing literature by examining the macroeconomic, political and institutional determinants of tax policy cyclicality conditional on financial development. We find that an increase in trade and financial openness leads to pro-cyclical VAT and counter-cyclical CIT rate response in high financially developed economies, while an increase in financial openness is associated with counter-cyclical VAT and PIT responses when the levels of financial development are low. A high public debt ratio leads to a counter-cyclical VAT rate response in economies with low financial development. Political power and fiscal institutions are factors that affect the tax policy cyclicality only in less financially developed economies.

Public Debt and Economic Growth in Africa in the Pre-Covid Era: The Role of Control of Corruption

There is evidence of recent rising public debts and low economic growth in Africa which is being attributed to the COVID-19 pandemic and the geopolitical tensions from the Russia-Ukraine war. With the evidence of also recent high corruption amidst low investments in Africa, it is thought-provoking to find empirically how public debt impact on economic growth per capita among African countries even before the COVID-19 pandemic and the geopolitical tensions from the Russia-Ukraine war with the mediation of control of corruption. The study used secondary data from the World Development Indicators, World Economic Outlook, and Worldwide Governance Indicators. The annual data spans from 1996 to 2019 for 45 countries. The study deployed a dynamic panel data estimation technique and controlled for other variables. The findings show a negative impact of gross debt percentage of GDP on economic growth but a positive interactive effect of excessive accumulation of gross public debt and the control of corruption on economic growth per capita among countries in Africa before the outbreak of the COVID-19 pandemic. In this COVID era of high public debt, governments can reduce their indebtedness by financing appropriate infrastructure while controlling corruption to increase the economic growth in their countries.

The Influence Of Profitability, Company Size, Media Exposure, And Leverage On Carbon Emissions Disclosure

The purpose of the study is to ascertain the influence of profitability, company size, media exposure and leverage on carbon emission disclosure. Previous research, carbon emission disclosures have not been consistent, so it is worth testing again. The novelty of the study, added the factor of media exposure. Measurement of carbon emission disclosure using information disclosure index based on CDP. The research method uses multiple linear regression. Data was collected from 37 companies in the agriculture and mining sectors in the 2019-2022 annual report. In this case, Return on Assets (ROA), Total Assets Value and high media exposure affect the disclosure of carbon emissions. Meanwhile, a high Debt to Assets Ratio (DAR) has no influence on carbon emission disclosure. The findings show agricultural and mining companies that disclose carbon emissions are affected by high profitability, large company size, and high media exposure. Companies that use leverage, meanwhile, cannot influence carbon emissions disclosure.

Leverage manipulation and strategic disclosure: evidence from non-financial information in annual reports based on multimodal machine learning

ABSTRACT This study adopts multi-modal machine learning to deeply interpret corporate non-financial information and explore the influence of corporate leverage manipulation on non-financial information disclosure. It is found that enterprises will strategically disclose non-financial information when implementing leverage manipulation, that is, the emotion of non-financial information text is more positive, farther away and more difficult. Based on the motivation of leverage manipulation, when enterprises face greater pressure of ‘deleveraging’ policy and stronger financing constraints, enterprises are more inclined to disclose non-financial information strategically when implementing leverage manipulation. Further, the dual motives of leverage manipulation are explored deeply. For the samples with high ‘deleveraging’ policy pressure such as state-owned enterprises and high media attention, and the samples with strong financing constraints such as high short-term debt repayment pressure and high debt financing cost, the positive relationship between leverage manipulation and strategic disclosure of non-financial information is more significant.

Fiscal Policy and Unemployment Nexus in Nigeria: An Empirical Analysis (1990–2021)

ABSTRACT: This study assessed the fiscal policy and unemployment nexus in Nigeria using time series data covering 1990 to 2021. Economic downturn, poor living standard, inadequate employment generation and increasing unemployment rate are sources of concern and worry. Job creation seems not to be getting the needed attention in the scheme of economic policies in Nigeria. The proxies for fiscal policy were: government capital expenditure (GCE), government revenue expenditure (GRE), government external debt (GED) and government total revenue (GTR), while that for unemployment was the unemployment rate. Specifically, this sought to examine the nexus between GCE and unemployment rate, GRE and unemployment rate, GED and unemployment rate, and GTR and unemployment rate. The ex-post-facto research design was used while the hypotheses were tested at 5% significance level. The time series data obtained from the Central Bank of Nigeria statistical bulletin was analyzed using the OLS technique. The test results showed that: GCE had a coefficient of 3.84 and a probability of 0.9893; GRE had -0.000481 coefficient and a probability of 0.6365; GED had 0.000584 coefficient and a probability of 0.1292 while GTR had 0.002070 coefficient and a probability of 0.0000. The probability f-statistic value of 0.000000 showed that proxies for fiscal policy are jointly significant to the unemployment rate. The adjusted R2 and Durbin-Watson values were 86% and 1.798125 respectively. It was recommended that the federal government should: (1) apply her capital expenditure properly and direct it to sectors that will help create more jobs and reduce unemployment rate, (2) make her recurrent expenditure to be supportive of the various government infrastructures, (3) drastically reduce her growing and high debt profile without commensurate job opportunities, (4) use her revenue to drive the economy instead of being applied on non-productive, white elephant projects or misappropriated.

Negative effects of high public debt on health systems facing pandemic crisis: Lessons from COVID-19 in Europe to prepare for future emergencies

<p>The investigation goal here was to analyze how the level of public debt affects preparedness of health systems to face emergencies. In particular, this study examined the negative effects of high public debt on health systems of European countries in the presence of the COVID-19 pandemic crisis. Empirical evidence revealed that European countries with a lower level of government debt as a percentage of GDP both in 2009 and 2019 (the period before the arrival of the pandemic) had lower COVID-19 fatality rates compared to countries with higher levels of public debt. The explanation is that high levels of public debt in countries trigger budget constraints that limit their ability to allocate resources to healthcare systems (e.g., health expenditures and investments), weakening health system performance and causing systemic vulnerability and lower preparedness during emergencies, such as with the COVID-19 pandemic. Implications of health policies are suggested to improve strategies of crisis management.</p>

An Analysis of the Causes of Evergrande Debt Crisis

Since August 2020, new regulations on real estate financing have been issued, emphasizing “the need to improve the marketization, standardization, and transparency of financing”. Subsequently, the capital liquidity crisis caused by Evergrande’s high debt and high turnover mode has become the focus of public attention in the market and has triggered the credit crisis of the real estate industry to a certain extent. This study is based on the public information such as the financial statements. To analyze and study the causes of the crisis, this paper will analyze the causes of the Evergrande Group crisis by comparing the previous financial statements of the company, using the balance sheet and comparing the profitability, and putting forward suggestions on the future liquidity and long-term development of Evergrande Group. The suggestions give inspiration to the same industry or enterprises in the same model. Warning the existing housing enterprises, Evergrande Group serves as the most negative example in textbooks, playing a warning role to prevent such a serious crisis from happening again.

Monetary and Fiscal Policy Interactions: Risks to Price Stability in Times of High Government Debt

Monetary and Fiscal Policy Interactions: Risks to Price Stability in Times of High Government Debt

CAPITAL STRUCTURE AND PROFITABILITY OF COMMERCIAL STATE-OWNED ENTERPRISES IN NAMIBIA

This study investigates the impact of capital structure on the performance of commercial stateowned enterprises (SOEs) in Namibia using panel data modelling techniques on data from 2011 to 2020. The research extends performance measures and leverage measures employed by previous studies, utilizing total liabilities to total assets (TLTA) and total equity to total assets (TETA) to examine the effects of debt structures on corporate finance. The study employs return on equity (ROE) and return on assets (ROA) as performance measures. The findings reveal no significant relationship between capital structure and profitability of commercial SOEs in Namibia, thus supporting the irrelevance theory. Additionally, a unidirectional causality is found between capital structure and profitability measures. The study's implications suggest that high debt levels should be reduced to optimize capital structure and that policies should be implemented to enhance SOE performance through innovation and best practices. The findings contribute to the ongoing debate on public sector reforms and provide a basis for further research in this area.

The Impact of Financial Literacy on Saving Habits among Malaysian Youth: A Gender-Based Analysis

This study examines the financial literacy and saving habits of Malaysia’s youth, with a particular focus on gender-based disparities and their implications. Recent reports highlighted a lot of young Malaysian’s struggles in terms of financial management, including high debt levels and inadequate savings among youth due to low financial literacy. Gender differences in financial literacy have been well documented, with men typically demonstrating higher levels of confidence and understanding in this area. Hence, this study aims to evaluate the saving habits and financial literacy levels of young Malaysians by looking at these factors via a gender lens. The research utilises a quantitative approach, using an online survey to gather information from 332 participants who are under 30 years old. SPSS was used to analyse the data, and descriptive statistics were used to discuss and summarise the results. The respondents’ saving habits and financial literacy were assessed using Likert-scale questions. A regression and correlation analysis were conducted to investigate the relationship between saving habits and financial literacy. The findings suggest that young people in Malaysia are usually quite financially literate; however, there are still gaps in their knowledge of advanced financial instruments. The majority of respondents have good saving habits; nonetheless, there are clear gender disparities, with males rating their financial literacy higher than women, especially when it comes to budgeting and investing. Regression analysis reveals a moderately positive correlation between financial literacy and saving habits, with financial literacy accounting for approximately 26.5% of the variance in saving habits. It appears that while financial literacy influences saving behaviour, there were fewer obvious gender variations in saving behaviours, suggesting that both genders engage in similar saving practices. These findings highlight the need for improved financial education to address identified gaps and promote better financial management for Malaysia’s youth.

The Effect Of Leverage, Company Size, Company Risk On Tax Avoidance In 2020-2022

The aim of this research is to see the effect of leverage, company size and company risk on tax avoidance. In this research, 18 companies were selected using purposive sampling criteria with a total of 54 objects studied in manufacturing companies in the raw materials sector during the period 2020 to 2022. The data used is secondary data in the form of financial reports obtained from the website www.idx.co .id was measured using the SPSS27 research tool with multiple linear regression analysis. The results of this research show that the variables leverage, company size and company risk have a positive and significant effect on tax avoidance. The R Square value is 44.8% of the variables leverage, company size and company risk, while the remaining 55.2% is influenced by variables outside this research. This research can provide insights and considerations for companies, it is recommended that they be careful in making decisions regarding increasing debt. This is because high debt can create risks that can result in companies facing potential bankruptcy and tax avoidance practices. Keywords : Leverage, Company Size, Company Risk and Tax Avoidance

Debt Crises, Fast and Slow

Abstract We build a dynamic model where the economy is vulnerable to belief-driven slow-moving debt crises at intermediate debt levels, and rollover crises at both low and high debt levels. Vis-à-vis the threat of slow-moving crises, countercyclical deficits generally welfare-dominate debt reduction policies. In a recession, optimizing governments only deleverage if debt is close to the threshold below which belief-driven slow-moving crises can no longer occur. The welfare benefits from deleveraging instead dominate if governments are concerned with losing market access even at low debt levels. Long bond maturities may fully eliminate belief-driven rollover crises but not slow-moving ones.

The macroeconomics of establishing a basic income grant in South Africa

AbstractThis paper quantifies the effect of fiscal transfers on the trade‐off between social relief and debt accumulation and discusses the economic growth and fiscal implications of different combinations of expanded social support and funding choices. Given South Africa's already high level of public debt, the opportunity to fund a basic income grant through higher debt is limited. Using a general equilibrium model, the paper shows that extending the social relief of distress grant could be fiscally feasible provided taxes rise to fund such a programme. Implementing such a policy would, however, have a contractionary impact on the economy. A larger basic income grant (even at the level of the food poverty line) would threaten fiscal sustainability as it would require large tax increases that would crowd‐out consumption and investment. The model results show that sustainably expanding social transfers requires structurally higher growth, which necessitates growth‐enhancing reforms that crowd‐in the private sector through, for example, relieving the energy constraint, increasing government infrastructure investment and expanding employment programmes.

Dynamic Stability of Public Debt: Evidence from the Eurozone Countries

This paper investigates the dynamic stability of public debt and its solvency condition in the face of crisis periods (1980–2021) in a sample of 11 euro-area countries. The focus is on the feedback loop between the dynamic stability of public debt and interest rates, discounted by economic growth, in conjunction with budget deficits during tranquil and turbulent periods. Using the GMM panel dynamic model, the results show that dynamic stability was the case before the global financial crisis (GFC), while from GFC to the pandemic, dynamic instability prevailed and persisted in the evolution of public debt. Furthermore, panel threshold estimates show that dynamic instability of debt starts to violate the solvency condition when the borrowing cost is above 3.29%, becomes even stronger when it is above 4.39%, and exerts even more pressure when the level of debt is greater than 91%. However, the debt sustainability condition reverses course when economic growth is higher than 3.4%. The main policy implication drawn from the results is that low interest rates can create a self-reinforcing loop of high debt, which itself is a serious matter for public authorities when designing economic policies.

From Borrowing to Growth: Ghana’s Public Debt Strategy within its Financial Development Trajectory

Purpose: The study examined the implications of Ghana’s soaring public debt on its financial development, specifically its banking behaviour. Given Ghana’s alarming public debt of 78.3% of GDP by 2022 and previous periods of high public debt correlating to global economic downturns, understanding this relationship is vital for both local and international policymakers.
 Methodology: The research employs annual growth rates of various financial development indicators (e.g, Ease of Doing Business Index and Digital Transaction Index) and measures public debt using the Public Debt-to-GDP Ratio. Advanced econometric methods were used to ensure data accuracy, including cointegration, error correction models, and tests like Dickey-Fuller, Augmented Dickey-Fuller, and Sargan-Rhargava Durbin-Watson.
 Findings: The ADF test confirmed the stationarity of all study variables. Cointegration tests show a long-term equilibrium relationship among the variables. In the short run, a positive and significant relationship exists between variables such as Domestic Bank Intermediation, Financial Development, and Public Debt. Regression outcomes indicate that as Public Debt escalates, there’s an associated increase in Financial Development in Ghana.
 Implications: These findings reveal that despite the potential pitfalls of high public debt, a complex dynamic exists where increasing public debt positively correlates with financial development in Ghana’s short run. This insight can be valuable for policymakers in balancing infrastructural investments, social programs, fiscal sustainability, and financial growth, especially for developing nations facing similar debt scenarios.
 Originality: This study offers a unique, in-depth three-decade analysis (1992-2022) on the relationship between Ghana’s public debt and banking behaviour. It is an empirical precedent for other nations to understand the intricate relationships between public debt and financial growth.

The Impact of Tax Cuts on Exchange Rate Changes in The Context of High Inflation and High Debt: Evidence from The UK "Mini-Budget"

This research mainly focuses on the exchange rate fluctuations after the British government of Liz Truss announced to introduce the tax reduction policies, mini-budget. This budget covers the abolition of the highest 45% income tax rate, turning down the income tax and partial stamp duty, aiming to provide greater tax relief to the wealthy to encourage investment and consumption. Based on the SVAR, in the case of high inflation and high debt, tax reduction policies may further intensify the pressure of currency depreciation, leading to a significant decline in the exchange rate. In addition, this paper found that fiscal expenditures and inflation rate have significant and persistent impact on the exchange rate. The conclusion of this research emphasizes that the tax reduction policies in the context of high inflation and high debt will exacerbate the exchange rate fluctuations, which has important implications for policy makers and market participants. In the current highly unstable global economy, a deep understanding of the impact of tax reduction policies on the money market is crucial for stabilizing the economy and monetary system.

Public Debt and Economic Growth after Covid-19 in Europe: Challenges and Policy Implications

The Covid-19 pandemic has had a profound impact on European economies, leading to a significant increase in public debt levels. This paper examines the challenges and policy implications of managing public debt and fostering economic growth in Europe post-Covid-19. It provides a conceptual framework by defining and measuring public debt, exploring the relationship between public debt and economic growth, and highlighting the role of public debt in times of crisis. The paper analyzes the impact of Covid-19 on public debt in Europe, including the fiscal response, debt accumulation, and reasons for increased debt levels. It further discusses the challenges posed by high public debt, such as debt sustainability, crowding out private investment, financial stability risks, and constraints on future fiscal policy.
 
 The study then presents policy implications for balancing public debt and economic growth, including fiscal consolidation measures, long-term debt management strategies, prioritizing public investments, implementing structural reforms, considering monetary policy, and fostering international cooperation. Additionally, the paper provides case studies of selected European countries, evaluating their approaches, assessing policy effectiveness, and drawing key lessons and best practices. Finally, the paper concludes with a summary of key findings, policy recommendations for European governments, and suggestions for future research directions.

The impact of Board Experience on Firm Performance: Evidence from Pakistan

This study shows that how Board experience as corporate governance Facets effect on firm performance (Evidence from Pakistan). The sample size of the study was 100 non-financial companies listed on Pakistan Stock Exchange selected through purposive sampling technique while covering the time period from 2010 to 2019. The result concluded that a significant relationship exists between Board working Experience (BWE) and Firm Performance. The result shows that increase the percentage of board working experience can better monitor all the activities of firms and avoid the firms to get higher debts which leads to better firm performance and mitigate the Effect of Default Risk. The importance of the study is that it highlights the different dimensions of female Board Member as corporate Governance facets which may be useful for investors before making any investment decisions. The existing literature is mostly related to the developed countries. In this view, this study may also have enhanced contribution in the literature because its results pertain to an emerging economy of Pakistan.

Mayday! Mayday! The airlines stock returns are failing. Analysis of the impact of Russia–Ukraine war

PurposeThis paper investigates the short-term market impact of the beginning of the military conflict between Russia and Ukraine (February 24, 2022) on a set of airline stocks listed.Design/methodology/approachThis study uses an event study methodology, cross-section analyses and interaction effects to study the effect of the war on airline stock prices and firm-specific characteristics that explain the cumulative abnormal return.FindingsThe authors observe a negative and statistically significant stock price reaction at and around the beginning of the military conflict between Russia and Ukraine, for 74 listed airlines. These results are consistent with investment portfolio rebalancing and asset pricing perspective. Moreover, this study's results show a higher negative stock market reaction for airlines based in Europe. Empirical evidence suggests the existence of a “proximity penalty” for European companies. Finally, this study's results provide insights into which airline-specific characteristics emerge as value drivers. Larger, well-capitalized (high liquidity and low debt) and profitable airlines firms with less institutional ownership have superior stock market returns and show more able to handle with the losses resulting from the war.Originality/valueThis paper fills a gap in the literature about the impact of the Russia–Ukraine war on the airline industry.

Temporal trends in sleep pattern among Chinese adults between 2010 and 2018: findings from five consecutive nationally representative surveys

ObjectivesThis study aimed to comprehensively analyze the time trends in average sleep duration and prevalence of short sleep, poor sleep quality, and high sleep debt among Chinese adults. Study designThis was a cross-sectional study. MethodsThe study used nationally representative data from Chinese Family Panel Survey (CFPS) among adults aged ≥18 years. Linear regression and logistic regression were used to calculate P-values for trends across waves, and absolute difference in prevalences were calculated by linear regression. Poisson regression analysis was used to calculate the prevalence ratios of sleep-related problems. ResultsIn 2018, the estimated average sleep duration in adults was 7.6 h/d. A shorter sleep duration, higher proportion of short sleep, and poor sleep quality were observed in people aged ≥65 years, women, people with primary school education or below, and residents in Liaoning province. The average sleep duration slightly decreased from 8.2 h/d in 2010 to 7.6 h/d in 2016, and then remained stable from 2016 to 2018. The prevalence of short sleep duration has markedly increased from 11.8% in 2010 to 24.1% in 2016, and then there was a decline in prevalence from 2016 to 2018, although this decrease was not significant. The prevalence of high sleep debt among employed people increased from 6.2% in 2010 to 8.6% in 2018 (absolute difference, 2.4 p.p; P trend = 0.063). In addition, the prevalence of poor sleep quality increased from 15.6% in 2012 to 21.3% in 2018 (absolute difference of 5.7 p.p; P trend<0.001). For all the sleep-related variables, the degree of changes varied by sociodemographic subgroups. ConclusionsIn this nationally representative survey of the Chinese population, the average sleep duration slightly decreased from 2010 to 2016, and then remained stable from 2016 to 2018. Poor sleep quality, and high sleep debt increased among most of the sociodemographic subgroups. Future studies are needed to understand the drivers of changes in sleep health among Chinese adults.