High Adjustable Speed Research Articles

Solvency constraint implications for tax liability targeting of banks in Ghana

This paper examines the implications of solvency constraints on the tax liability targeting in the Ghanaian banking sector. The analyses are based on 15-year annual data spanning 2008 to 2022 interpolated into monthly data frequency using the Denton procedure. The Dynamic OLS (DOLS) estimator, residual-based stationarity test, delay, and half-life techniques were employed in the estimations. The solvency constraint scenario exhibits a cointegration relationship with the tax liability target. The study finds evidence of a high speed of adjustment or convergence to tax liability targets in response to solvency constraints, with a high degree of persistence across the various solvency constraint proxies. The solvency constraint has deleterious tax revenue implications for the government and risk-adjusted tax savings for banks in Ghana. It is recommended that the government reorients its general policy to ensure stability in the Ghanaian banking sector to achieve favourable tax revenue from the sector, as uncertainties may trigger a deleterious tax-targeting scheme. Investors and financial analysts could use tax liability trends as a baseline to identify stressing scenarios, including solvency constraints.

Major Customers and the Speed of Leverage Adjustments

Purpose: This study investigates how major customers influence the speed of adjustment (SOA) in a firm's capital structure, specifically examining the effects of governmental versus non-governmental major customers.Study design/methodology/approach: The study employs Blundell and Bond’s (1998) GMM model to estimate SOA. Robustness methods include fixed effects, two-stage least squares (2SLS), propensity score matching (PSM), and the augmented doubly censored Tobit (DPF estimator).Sample and data: The sample consists of 186,240 firm-year observations from Compustat North America annual files and Compustat historical segment files, spanning 1978 to 2013. Firms in the utility and financial sectors are excluded.Results: Findings indicate that major customers significantly influence SOA by reducing market uncertainty through certifications. Firms with major customers have a higher SOA, with governmental customers exhibiting an even higher SOA than non-governmental ones. Results are consistent across various models and settings.Originality/value: This study uniquely identifies major customers as critical determinants of SOA, highlighting the heterogeneities in firms' SOA. It stresses the importance of considering customer type in financial strategies, differentiating between governmental and non-governmental impacts. These findings offer valuable insights for scholars, policymakers, and practitioners.Research limitations/implications: Focusing on publicly listed U.S. firms limits generalization. Future research should extend the analysis to other regions and recent periods. The findings provide insights for supplier firms in strategizing financial decisions and managing relationships with major customers. We emphasize the significant role of major customers in financial strategies, advocating for more detailed disclosure policies in the U.S. and globally to enhance transparency and market efficiency.

National culture and capital structure dynamics

PurposeWe expand the recent literature on the dynamics of capital structure decisions by investigating the impact of national culture on firms' optimal debt ratios and their dynamic re-adjustment process. To this end, we aim at estimating firm-specific speeds of leverage adjustment, allowing for heterogeneous dynamics in firms' capital structure.Design/methodology/approachWe use dynamic panel data estimators to analyze the impact of cultural factors on the dynamics of debt ratios.FindingsWe show that national culture affects the optimal level of leverage and the dynamic rebalancing of debt ratios, both directly and indirectly, by altering the effect of firm characteristics and macroeconomic factors on firms' financing behavior. Firms converge faster towards the optimal leverage in countries with a stronger attitude to conform with the norm, while they are slower where there is a higher propensity to intellectual autonomy. A higher risk aversion and long-run propensity induce over-levered firms to reduce leverage faster, making the adjustment process strongly asymmetric. Moreover, national culture also produces indirect effects by mitigating the impact of asymmetric information on capital structure decisions. Indeed, firms in more individualistic countries display a lower speed of adjustment and a stronger effect of firm characteristics associated with higher agency costs. On the contrary, firms in countries with a higher tendency to conform to social norms, less individualistic and more long-term oriented have a higher adjustment speed and appear to suffer less from agency issues. Our results therefore highlight how national culture affects agency problems within firms, thus suggesting the adoption of country-specific corporate governance provisions accounting for the effects of local cultural traits on managers' behavior.Originality/valueWe expand the capital structure and governance literature by showing how cultural traits impact on the dynamics of debt ratios. In particular, we show how cultural traits may mitigate or exacerbate the role of agency issues on firms' behavior, hence suggesting that cultural factors may interact with governance rules in shaping firms' decisions. Therefore, our work highlights how policy-makers should include cultural aspects when defining regulation concerning corporate governance.

FINANCIAL INTERMEDIATION AND ECONOMIC GROWTH IN NIGERIA

Objective: This study examined the impact of financial intermediation on economic growth in Nigeria. The study employed secondary data obtained from the Central Bank of Nigeria statistical bulletin from year 1987 to 2020. Method: The independent variable – Financial intermediation was proxied by credit to private sector, broad money supply, lending rate, market capitalization and total value of shares traded while the dependent variable – Economic growth was proxied by gross domestic product and per capital income. Autoregressive Distributed Lag (ARDL)/Bound testing to co-integration was used to establish the short run and long-run dynamic impact of financial intermediary on economic growth in Nigeria. Results: The study revealed a high speed of adjustment in the short run (Cointeq(-1) = (-0.9995; -0.981099) for the two models respectively. Similarly, for the GDP model, the study revealed that in the long run, credit to private sector (β1 = 0.0121); market capitalization (β4 = 0.05423) and total volume of shares traded (β5 = 1.62669) all established positively significant impact on economic growth in Nigeria at 5% significance level except broad money supply (β2 = - 0.00511) and lending rates (β3 = - 0.14194) which established negatively significant impact on economic growth in Nigeria at 5% significance level. However, for the PCI model, the study revealed that in the long run, credit to private sector (β1 = 0.002216); market capitalization (β4 = 0.095095) and total volume of shares traded (β5 = 1.915620) all established positively significant impact on economic growth in Nigeria at 5% significance level except broad money supply (β2 = -0.008476) and lending rates (β3 = -0.313843) which established negatively significant impact on economic growth in Nigeria at 5% significance level. Conclusion: The study therefore, recommends that management of banks should be encouraged to pursue policies that will deepen the efficient allocation of financial services for economic growth in Nigeria.

Does Support Price Policy Drive Yield Rate? An Econometric Investigation of Wheat and Sugarcane Crops in Pakistan

The governments of developing economies incentivize the cultivators of their most strategic crops by offering them minimum support price for their yield. This study aims at identifying distinctively the short-run dynamics and the long-run causal linkage of support price and yield rates for two major food crops of the country; wheat and sugarcane. Employing advance time-series econometric estimators of Error Correction Model (ECM) and Fully Modified OLS (FMOLS) cointegration regression, results indicate the valid existence of hypothesized relationship over both short and longer time horizons. Each year, the short-term divergence of two crop yields from their long-run equilibrium paths turns out to be corrected with high speed of adjustment. The long-run association between two variables is also found evident with decent magnitude and high degree of statistical significance. These findings favour the use of support prices as a long-term policy tool for encouraging cultivation of wheat and sugarcane crops in country. However, the overall welfare consequences of such a policy should never be over-rated in a society like Pakistan which is largely characterized by horrific levels of corruption and innumerable administrative bottlenecks.

Impact of, Human Capital, Economic Factors, Energy Consumption, and Urban Growth on Environmental Sustainability in Morocco: An ARDL Approach

This study aims to examine the impact of human capital, energy consumption, urbanization, growth, trade openness and foreign direct investment on Morocco’s environmental sustainability using annual data from 1970 to 2019 and, in light of, recommend policy implications. We used the ARDL approach to identify the potential linkage between carbon emissions and the explicative variables. The ADF unit root test is used to check the stationarity of all variables, showed that five of them become stationary after first differentiation. The result from the bound test indicated the existence of a long run relationship which confirmed the existence of co-integration with high speed of adjustment towards the long-run equilibrium. We found that increase in human capital leads to decrease in carbon emissions, meanwhile increase in both economic growth and energy consumption generate an opposite result, other things equal. Our finding validates the theoretical frame work involved in this study (STIRPAT: Stochastic Impact by Regression on Population, Affluence, and Technology, 1997) that confirms the possibility of promoting environmental sustainability through reducing carbon emissions, rationalizing energy consumption, reorienting economic growth into an eco-friendly model, building and enhancing human capital through education, besides working on rising economic openness and investment attractiveness of Morocco.

Corporate Governance and Cash Holdings among Non-Financial Companies Listed in the Nigerian Exchange Group

The exogenous shocks that necessitate firm deviation from a target cash holding vary across firms and institutional environments, hence the need for the study. This study examines the relationship between corporate governance (CG) and cash holdings among non-financial companies in the Nigerian Exchange Group between 2011 and 2020. The number of populations is 133 non-financial firms. As not all firms disclosed publicly comprehensive annual reports the number of final samples is 88 firms. Generalized Method of Moments (GMM) and the quantile techniques were adopted. With a speed of adjustment (SOA) of 0.75 and a time frame of one year, three months, and four days (1/0.749 = 1.34), the result reveals a partial dynamic adjustment to target cash holdings. The quantile estimation generally reveals low cash holdings and high SOA dynamics, and it is significant at 5% level. With exception of board gender diversity and institutional ownership, variables such as board independence, size, and chief executive officer equity ownership exhibit a significant inverse impact on cash holdings at a 5% level. Relying on the dynamic trade-off and agency theories, the results conform to a prior expectation. This study recommends that a manager should formulate strategic financial policy based on a firm’s specific SOA.

Recycling rate performance and socioeconomic determinants: Evidence from aggregate and regional data across European Union countries

The recycling rates for the EU Member States deviate significantly from the targets set by Directive (2018)/851 for attaining the target of 55% by 2025 (European union, 2018). The aim of the study is to investigate the short- and long-term relationship between macroeconomic variables and the recycling rates performance at both national and regional level. Within this context, four sets of variables are examined, namely sociodemographic, economic and institutional factors. For the purpose of the analysis, the available data acquired from 28 EU countries during the period between 2000 and 2020, as well as from 38 EU regions during 2000–2018 and a panel data approach using OLS, Fixed Effects, Random Effects, FMOLS, and ECM techniques is implemented. Findings robustly indicate that factors such as economic performance, institutional quality, and higher educational attainment significantly contribute to the EU circular economy. Results imply that changes in agricultural intensification and population density significantly affect recycling levels. A particularly significant finding that contributes to the existing literature is the higher speed of adjustment, as indicated by the lagged ECT, at the NUTS-1 level compared to the NUTS-2 level. Thus, recycling policy outcomes, implemented policies, and interventions adjust more rapidly towards their equilibrium state, resulting in immediate impacts and faster changes at NUTS-1 level. On the contrary, it takes more time for these policy outcomes to materialize at the regional scale. Policymakers should prioritize reducing income disparities, improving transparency, investing in education, and promoting sustainable agriculture and waste management infrastructure to support the circular economy.

Evaluating the Effect of Oil Price Volatility on Capital Expenditure of Federal Government in Nigeria

This study examined the effect of oil price volatility on federal government capital expenditure in Nigeria for the period 1993 to 2022 using secondary data from relevant government agencies. The study specifically examine the impact of Brent UK crude oil price volatility, OPEC spot rate crude oil volatility and West Texas Intermediate crude oil price volatility controlling the disruptions of oil subsidy, corruption and inflation on capital expenditure. The research employed an ex-post facto research design to produce results via Bounds test and Autoregressive Distributed Lag regression test. The long run estimate of the model report that Brent UK crude oil price volatility, OPEC spot rate crude oil volatility and West Texas Intermediate crude oil price volatility failed to report significant effect on the federal government capital expenditure in Nigeria. This shows that the oil price volatility is a short run phenomenon, that will fade out in short period, hence the reason for the high speed of adjustment of the error correction term. There is need for federal government in Nigeria to continually monitor crude oil international price and negotiate with OPEC on production output and quota. There is also need to monitor federal government’s capital expenditure pattern and revenues in critical revenue generating agencies. Federal Government should remain committed to sustaining fiscal adjustments by creating fiscal space for capital and infrastructural development.

EXCHANGE AND EXPORT ANALYSIS OF THE COMBINED STOCK PRICE INDEX IN INDONESIA PERIOD 1986-2022

Many previous studies have proven that there is an influence between the exchange rate (the Rupiah exchange rate against the US Dollar), Exports on the Composite Stock Price Index (IHSG). By using the Autoregressive Distributed Lag (ARDL) model approach using the Eviews 10 program. In this study, we look more deeply at the dynamics of long-term and short-term relationships for the variable exchange rate of the Rupiah against the US Dollar, Exports and the JCI. The research period starts from 1986 to 2022, during which time there are many global upheavals that have a significant impact on Indonesia, one of which is the weakening of the Rupiah exchange rate against the US Dollar. In this study, through the ARDL model of the Rupiah exchange rate against the US Dollar, Exports and JCI are proven to have long-term cointegration or move together in the long term. But not only in the long term, these three variables also have short-term relationship dynamics which have a fairly high speed of adjustment towards balance every year.

Identifying fetal status with fetal heart rate: Deep learning approach based on long convolution

CTG (Cardiotocography) is an effective tool for fetal status assessment. Clinically, doctors mainly evaluate the health of fetus by observing FHR (fetal heart rate). The rapid development of Artificial Intelligence has led realization of computer-aided CTG technology, Intelligent CTG classification based on FHR is a fundamental component of these technologies. Its implementation can provide doctors with auxiliary decisions. Most of existing FHR classification methods are based on combing different deep learning models, such as CNN (Convolutional Neural Network), LSTM (Long short-term memory) and Transformer. However, these studies ignore the balance of positive and negative samples in dataset and the matching degree between model and FHR classification task, which reduces the classification accuracy. In this paper, we mainly discuss two major problems in previous FHR classification studies: reduce class imbalance and select appropriate convolution kernel. To address above two problems, we propose a data augmentation method based on ECMN (Edge Clipping and Multiscale Noise) to resolve class imbalance. Subsequently, we introduce a one-dimensional long convolutional layer, which use trend area to calculate the appropriate convolution kernel. Based on appropriate convolution kernel, an improved residual structure with attention mechanism named TGLCN (Trend-Guided Long Convolution Network) is proposed to improve FHR classification accuracy. Finally, horizontal and longitudinal experiments show that the TGLCN obtains high classification accuracy and speed of parameter adjustment.

Human capital and its impact on Ethiopian economic growth: ARDL approach to co-integration

Maintaining human capital at an optimal level is among the important mechanisms for ensuring steady economic growth. This study aims to examine the impact of human capital on Ethiopia’s economic growth. The study used the ARDL model applying annual data for the period 1980 to 2020. The ARDL-bound test was used to evaluate the presence of con-integration between human capital and independent variables. The study also applied the augmented Dickey-Fuller and Phillips-Perron unit root tests to check the stationarity of the variables. The test result presented that almost all variables become stationary after the first difference. Accordingly, the result from the bound test indicated the existence of a long-run relationship between the dependent variable and independent variables entered into the model. The estimated error correction model with a − 0.9528 coefficient also confirmed the existence of co-integration with a high speed of adjustment towards the long-run equilibrium. In the long-run real GDP, education expenditure, health expenditure, labor force, gross capital formation, total government expenditure, official development assistance, secondary school enrolment, consumer price index, drought, and policy change have astable long-run connection. The finding indicates an increasing ratio of health expenditure and secondary school enrollment should be designed, among others, to contain improved human capital in Ethiopia.

Disaggregated Government Expenditure and Economic Development in Nigeria: An Econometric Analysis. (1981-2020)

This study empirically examined disaggregated government expenditure and economic development in Nigeria using data spanning between the periods 1981 to 2020 by employing the use of Augmented Dickey Fuller test, Co integration test and Vector Error Correction technique (VECM) as the statistical techniques of analysis. From the study, the error correction model is -0.709 and it shows that about 70.9 percent of the short run shocks in Human Capital Development (HDI) in Nigeria are adjusted annually and such high speed of adjustment is very fundamental in the process of policy conception, formulation and implementation. This aforementioned finding revealed that there is a long run equilibrium relationship between human development index and various government expenditures variables as shown by the error correction model which is very high, rightly signed and significant. Also, the results show that in the long run that government expenditure on social security, government expenditure on education, health expenditure and agricultural expenditure have a positive and significant impact on human development index while government expenditure on infrastructure has a negative but significant effect on human development index in Nigeria. Furthermore, the short run estimates show that government expenditure on infrastructure (GEI) has a significant effect on HDI at lag period one and two while government expenditure on education and government expenditure on agriculture were found to be significant at lag period one respectively. Conversely, government expenditure on social security and government expenditure on health have a direct and insignificant effect on human development index in Nigeria. By implication, the findings indicate that government spending play a crucial role in the development of human capital in Nigeria. The study therefore concludes that there is need for federal government to be consistent in allocation and redistribution of government spending to various key sectors of the economy such as education, health, agriculture and defence which will invariably contribute positively and significantly to the human development in the country. Finally, there is need to ensure that federal government appropriate more funds to these key sectors annually.

NEXUS BETWEEN UNEMPLOYMENT, INFLATION AND ECONOMIC GROWTH IN NIGERIA

Unemployment and inflation are twin evils that are bedeviling economies of the world and have continuously attracted the concern of economists. Most developing countries Nigeria in particular is battling with these problems. This study examines the nexus between unemployment, inflation and economic growth in Nigeria from 1981 to 2020. Diagnostic test was conducted to ascertain the behavior of the series. The Augmented Dickey Fuller (ADF) and Philips Perron (PP) test results are reported. Based on the test, the variables in the model are of mixed order of integration i.e., two of the variables are I(1) and one is I(0) . The Autoregressive distributed lag (ARDL) bound co-integration test was conducted to check for possible long run relationship. It was found that there is a long-run relationship in the model. Thus, the ARDL ECM was used for the estimation. Results from the ARDL estimation reveal that the Error Correction Mechanism (ECM) has the expected negative sign with a high speed of adjustment of 71% back to equilibrium; there is a long-run negative relationship between unemployment and economic growth in Nigeria over the period of study; there is a long-run negative relationship between inflation and economic growth in Nigeria over the period of study. Based on these findings, this paper recommended that the government of Nigeria should spend more money on training and skill acquisition in order to combat unemployment. More so, excessive and galloping rise on the prices of goods and services in Nigeria should be control.

Agricultural supply response and price risk of maize and sorghum in South Africa

The study used the Autoregressive Distributed Lag-Error Correction Model (ARDL-ECM) approach to estimate the responsiveness of South African maize and sorghum producers to price risk, price incentives and non-price incentives. The price risk variable was incorporated in the supply models to examine its impact on maize and sorghum production decisions. The study used annual historical time series data of 49 observations for the period 1970 to 2018 was used in the analysis. The empirical results reveal that maize and sorghum producers' response to own price is reasonably low. The study further shows that both maize and sorghum crops demonstrate a high speed of adjustment to the long-run equilibrium, which means that in the event of a shock to the system, grain output will quickly re-establish itself at a faster rate. The findings underscore the relevance of price risk in determining production output in South Africa.

Heterogeneity in capital structure adjustment revisited: Default versus non-default firms and short versus long time horizon

This paper reexamines the issue of the heterogeneity of the speed of capital structure adjustment in firms. In contrast to previously documented contemporaneous results, we test the issue by making a distinction between default and non-default firms and employ two measures of the speed of adjustment (cumulative versus marginal). Our empirical results show that the speed of adjustment is non-uniform across firms and over time. In particular, default firms are associated with a higher speed of adjustment than non-default firms. The completion of leverage adjustment takes multiple periods. The marginal speed of adjustment accelerates from the beginning period to the end period, which is consistent with the anchoring and adjustment bias heuristic. Our empirical results are robust to using a book/market leverage, a two-/one-step estimation approach as well as the consideration of panel length, non-financial debt, zero-leverage firms, and endogeneity.

Cotton Imports and GDP of Indonesia- Cointegration Analysis

The study examines the impact of cotton imports on the real GDP (Gross Domestic Product) of Indonesia for a period from 1992 to 2018 using ARDL approach and Granger causality analysis. Results of the study indicated that cotton imports have negative effect on economic growth. For every 1% increase in cotton imports the real GDP decreased by 0.107% in the long run. Any disequilibrium in the model is adjusted with a high speed of adjustment of 107.7% in less than a year. Shocks and the trend are adjusted in less than one year. There is no causality between imports of cotton and the real GDP. The study suggested effort should be taken by the government to increase yield of cotton by the use of technology and also a need to initiate farmers to take up cotton farming.

Show Me the Money! Dividend Policy in Countries with Weak Institutions

ABSTRACTWe hypothesize that, in weak‐institution countries, firms adjust the ‘timing’ of dividend payments by committing to distribute a percentage of current earnings as dividends, revealing the extent of firm‐level agency conflicts to future investors and facilitating the raising of external capital. Consistent with this hypothesis, we find that, on average, firms in weak‐institution countries have a higher speed of adjustment (SOA) to their target payout ratio, pay dividends earlier in the life cycle, and are more likely to disclose a dividend policy committing to pay a minimum percentage of earnings. Within‐country tests show that, in weak‐institution countries, the firms with the highest SOA dividend policies have fewer agency problems and an increased ability to raise external capital. Finally, returns tests around earnings announcements show that high‐SOA dividend policies are associated with larger market reactions to earnings in weak‐institution countries. Collectively, our findings suggest that dividend policy helps to alleviate agency conflicts in weak‐institution countries between firms and (future) investors.

Show Me the Money! Dividend Policy in Countries with Weak Institutions

We hypothesize that, in weak-institution countries, firms adjust the ‘timing’ of dividend payments by committing to distribute a percentage of current earnings as dividends, revealing the extent of firm-level agency conflicts to future investors and facilitating the raising of external capital. Consistent with this hypothesis, we find that, on average, firms in weak-institution countries have a higher speed of adjustment (SOA) to their target payout ratio, pay dividends earlier in the life cycle, and are more likely to disclose a dividend policy committing to pay a minimum percentage of earnings. Within-country tests show that, in weak-institution countries, the firms with the highest SOA dividend policies have fewer agency problems and an increased ability to raise external capital. Finally, returns tests around earnings announcements show that high-SOA dividend policies are associated with larger market reactions to earnings in weak-institution countries. Collectively, our findings suggest that dividend policy helps to alleviate agency conflicts in weak-institution countries between firms and (future) investors.

Credit and liquidity risk in the determination of spread over business cycles

The difference between the amount paid to depositors and the amount charged from borrowers, defined as bank spread, is determined by several factors. Two of them, according to theoretical models, are credit risk and liquidity risk. In this context, we aim to analyse whether these factors change their influence on spread over different periods of business cycles. Brazilian banks were used to evaluate the behaviour of spread at various periods during business cycles by applying the modelling suggested by Aydemir and Guloglu (2017). However, the results show that the influence of credit risk and liquidity risk on the average conditional spread does not change at different periods over business cycles. Furthermore, credit risk and liquidity risk adversely affect spread, contradicting studies on the Brazilian economy, such as Almeida and Divino (2015). Finally, we conclude that spread is procyclical and has a high speed of adjustment.