Accounting and Finance

This study investigates whether or not threshold effect of inflation holds in South Africa using annual dataset from 1965 to 2010. It employs nonlinear regression models and finds evidence that suggests that there is a 7% threshold level of inflation above which the effect of inflation on economic growth is negative and statistically significant. Consequently, the study postulates that holding inflation below 7% threshold could promote growth in South Africa.

The paper explores whether entrepreneurship is a significant determinant of financial development in 12 African countries. Study Design: Cross-sectional Study Place and Duration of Study: The study is in 12 African countries between 2004-2011 Methodology: Total domestic credit provided to the private sector by the banking sector as a share of GDP and the number of new business start-ups registered in each fiscal year are used to measure financial development and entrepreneurship respectively. We use data (2004-2011) from 12 African countries(

The paper investigates whether single-digit inflation promotes economic growth with annual time series data from South Africa . Evidence from the analysis suggests that single-digit inflation undermines economic growth in the long run. The paper, therefore, submits that inflation targeting in the single-digit threshold may not be in the best interest of a developing economy like South Africa.

The paper investigates the determinants of bank board structure in Ghana and finds that the Scope of Operations Hypothesis could explain the variation in board size but not board independence. On the other hand, the Board Monitoring Hypothesis could only explain the variation in board independence but not board size. The study also finds that cost-income ratio, foreign majority ownership structure and Ghana Stock Exchange listing status are positively and significantly associated with large bank board size. The paper, therefore, argues that as a bank grows in Ghana the size of its board of directors is likely to increase. However, the increase is likely to result in inefficiency of the bank. Furthermore, the study has evidence to conclude that banks with foreign majority ownership structure are not likely to appoint more independent directors.

The discourse on the finance-growth connection is yet to be laid to rest. This paper contributes to the discourse by analyzing data (1981-2010) from Botswana. The paper uses Fully Modified Ordinary Least Squares regression technique and Pairwise Granger Causality for analysis. The results show that when domestic credit to the private sector as a share of GDP is used to proxy financial development, there is a negative, significant relationship between financial development and economic growth in Botswana. However, when the ratio of liquid liabilities (M3) to GDP is used to measure financial development, a positive, significant relationship is found. Pairwise Granger Causality test results reveal that economic growth Granger-causes a reduction in financial development when domestic credit to GDP ratio is used to proxy financial development. On the other hand, when M3 to GDP is used to proxy financial development, finance precedes growth. The paper, therefore, argues that finance may promote growth in Botswana via the expansion of the size of the financial intermediary sector.

The aim of the study is to investigate whether or not inflation in South Africa is a structural or monetary phenomenon. Study Design: Case Study. Place and Duration of Study: South Africa. Time series data ranging from 1965 to 2006. Methodology: The study employs unit root testing, co-integration analysis, Fully Modified Ordinary Least Squares (FMOLS) regression, Two-Stage Least Squares (2SLS) regression, Error Correction Model and pair wise Granger Causality Test technique to analyze annual time series data from South Africa.

The relationship between inflation and stock market returns has been theoretically and empirically discussed albeit inconclusive results. Whereas some studies find a positive relationship, others find a negative relationship. This paper contributes to the empirical conversation using data (January 1992-December 2010) from the Ghana Stock Exchange (GSE) which is one of the emerging markets in Africa.

The paper explores the predictors of financial development in Ghana using data that span from 1971 to 2010. Evidence from the data supports the conclusion that interest rates and economic openness are long run significant predictors of financial development in Ghana whilst size of government is a short run significant predictor of financial development in Ghana. Economic growth, structural adjustment programme and democratic political system are not significant determinants of financial development. The results of the Granger causality tests in the error correction mode indicate a unidirectional causality running from economic openness and interest rate to financial development, meaning economic openness and interest rate drive financial development towards long run equilibrium. To the extent that rising interest rate as well as rising economic openness demonstrates a robust positive relationship with financial development, the paper contends that government intervention in the form of financial repression as well as trade restrictions should be avoided if the financial sector in Ghana is to develop. However, regarding economic openness, the paper cautions that the government must proceed with tact and circumspection so as to avoid the destabilizing effects of economic liberalization such as stock market volatility. JEL classification numbers: G20, D90, E02, E44, C13, C22

The study investigates whether the stock market in Ghana contributes to the growth of the Ghanaian economy using quarterly data (2006Q1-2013Q2). A bounds testing approach to cointegration and Granger causality in the vector error correction model are used for analysis. The results of the cointegration analysis indicate that there is a long-run cointegrating relationship between stock market development and economic growth. The results of the causality analysis demonstrate that there is a unidirectional causality running from stock market development to economic growth. However, since the long-run regression analysis shows a negative relationship between stock market development and economic growth, we conclude that stock market development does not promote economic growth in Ghana.

Abstract: This paper analyzes the profitability of 112 rural banks (special unit banks
created to promote rural financial intermediation in Ghana). The results generally
show that bank size, funding risk, diversification, liquidity risk, and bank stability are
significant predictors of rural bank profitability. Whereas an improvement in the funding
risk of a rural bank in a particular period portends a drop in its profitability in the
future, an improvement in the size, diversification, liquidity risk, and stability of a rural
bank signifies an improvement in the future profitability of the bank.

Does bank size significantly explain the variations in bank stability? Does bank funding risk significantly impact bank stability? This paper addresses these two questions with data from the rural banking industry in Ghana. Controlling for credit risk, liquidity risk, diversification in the business model, profitability, inflation, financial structure and gross domestic product, the results suggest that an increase in the size of a rural bank results in an increase in its stability. The results also show that funding risk positively impacts bank stability. The positive relationship between size and bank stability has important repercussions for the current debate on whether or not to constrain bank size to insulate the financial system from future crisis. The positive relationship between funding risk and bank stability also has important implications for the current debate on funding of retail banks.

This paper analyzes the profitability of 112 rural banks (special unit banks created to promote rural financial intermediation in Ghana). The results generally show that bank size, funding risk, diversification, liquidity risk, and bank stability are significant predictors of rural bank profitability. Whereas an improvement in the funding risk of a rural bank in a particular period portends a drop in its profitability in the future, an improvement in the size, diversification, liquidity risk, and stability of a rural bank signifies an improvement in the future profitability of the bank.

The study explores the determinants of credit union (CU) savings in Ghana and finds that credit risk, assets (size) and female membership are significant determinants of CU savings. Whereas a rise in CU credit risk increases CU savings, a rise in female membership as well as CU assets is characterised by a fall in CU savings. The study, therefore, argues that CUs in Ghana could maximise their savings if they target their savings-mobilisation campaigns at income-earning men with higher marginal propensity to save coupled with the adoption of an effective and efficient asset management policy.

The paper investigates whether economic growth promotes financial development with annual time series data from 24 African countries. The study uses Generalized Method of Moments (GMM) estimation technique with domestic credit to the private sector as proxy for financial development. The results show that economic growth promotes financial development in the 24 African countries. The results also show that human capital and inflation have positive and negative relationships with financial development respectively. These findings suggest that policies that stimulate economic growth and human capital development as well as keep inflation rates at low levels are needed to improve the financial systems of the study countries.

There seems to be a cloud of scepticism hanging over the value of entrepreneurship to the growth processes of developing economies. This haze of scepticism is fuelled by the reverberating mantra by a section of the extant literature that replicative entrepreneurship (entrepreneurship which is generally considered not to be growth-supporting) is pervasive in developing economies including Africa. We take motivation from this postulation to investigate whether entrepreneurship is of any relevance to the growth processes of 12 African countries. The results show that entrepreneurship positively explains the variations in the growth of the study countries. It is, thus, reasonable to contend that entrepreneurship in developing economies including Africa even if replicative is instrumental to economic growth.

The strategic importance of banks in almost every economy underpins the soaring interest in their sustainability with technical efficiency touted as one of the barometers of sustainability. Using data envelopment analysis, the study measures the technical efficiency and scale efficiency of 23 universal banks in Ghana with 2013 dataset. The results reveal that 11 out of the 23 banks operated efficiently during the year under consideration. Two local banks have been found to be highly robust efficient banks. The average overall technical efficiency of the banks is 89%, suggesting 11% technically inefficiency in the sample. In terms of returns-to-scale in the sample, the results suggest that the predominant form of scale inefficiency is increasing returns-to-scale, implying that most of the banks have the capacity to improve their efficiency by increasing their scale of operations.