Raymond K. Dziwornu, Eric B. Yiadom and Sampson B. Narteh-yoe
The cost of agricultural loans is a major constraint to the growth of the agriculture sector. This paper examines agricultural loan pricing by banks in Ghana using panel data…
Abstract
Purpose
The cost of agricultural loans is a major constraint to the growth of the agriculture sector. This paper examines agricultural loan pricing by banks in Ghana using panel data analysis.
Design/methodology/approach
Data were obtained from audited financial reports of 15 agricultural loan lending banks from 2010 to 2017. The study applies the random-effect model and the fixed-effect model in the analysis and uses the system generalized system method of moment to check the robustness of the results from the baseline models.
Findings
The study found that agricultural loan pricing by banks is significantly influenced by risk premium, cost of funds, loan impairment, agricultural growth rate and food inflation. Banks should leverage emerging technologies to de-risk agriculture loan pricing to allay the fear of default. Farmers should look for long-term and relatively cheaper funds to support agricultural loans. Increasing credit to the agricultural sector could increase output, thereby reducing food inflation uncertainty for competitive pricing of agricultural loans.
Originality/value
Agriculture employs about 52% of Ghana's labor force, contributing about 20% to GDP. But it is “under” financed. This study leads the way in unraveling the factors accounting for the high prices of agricultural loans in Ghana. This study further contributes to policy development toward increasing credit to the agricultural sector.
Details
Keywords
Josephine Ofosu-Mensah Ababio, Eric B. Yiadom, John K.M. Mawutor, Joseph K. Tuffour and Edward Attah‐Botchwey
This study aims to use 67 developing countries to examine the role of financial inclusion as an “empowering tool” for renewable energy uptake and to improve environmental…
Abstract
Purpose
This study aims to use 67 developing countries to examine the role of financial inclusion as an “empowering tool” for renewable energy uptake and to improve environmental sustainability in developing countries.
Design/methodology/approach
Using a battery of econometric models, including the generalized method of moment-panel vector autoregression (GMM-PVAR), impulse response function, Granger causality, fully modified ordinary least squares and dynamic ordinary least squares, the study proposed and tested three hypotheses.
Findings
The results from various estimations indicate that financial inclusion has a positive effect on renewable energy consumption and environmental sustainability improvement in developing countries. The findings suggest that financial inclusion can improve environmental sustainability by increasing access to financing to fund renewable energy projects, support sustainable businesses and promote sustainable practices.
Originality/value
This study suggests that policymakers prioritize financial inclusion to promote renewable energy consumption and environmental sustainability. Policies should enhance access to financial services, offer financial incentives and subsidies, provide affordable loans through microfinance institutions and fintech companies and promote sustainable businesses and green technologies.
Details
Keywords
Josephine Ofosu-Mensah Ababio, Eric B. Yiadom, Emmanuel Sarpong-Kumankoma and Isaac Boadi
This study aims to examine the relationship between financial inclusion and financial system development in emerging and frontier markets.
Abstract
Purpose
This study aims to examine the relationship between financial inclusion and financial system development in emerging and frontier markets.
Design/methodology/approach
Using data across 35 countries over 19 years (2004–2022), the improved GMM estimation technique reveals that financial inclusion significantly contributes to the development of financial systems.
Findings
The study uses a segmented approach, dividing financial development indices into subindices: financial depth, financial access and financial efficiency. Indicators of bank financial inclusion show a positive and highly significant relationship with bank depth and access but a negative relationship with bank efficiency. Similarly, indicators of the debt market and stock market financial inclusion demonstrate positive relationships with market depth and access but negative relationships with debt and stock market efficiency. The study further examines composite indexes of financial inclusion for bank, debt and stock market segments, finding strong and highly significant relationships with market development. These results underscore the importance of promoting financial inclusion across all segments of the financial sector to achieve an inclusive financial system.
Practical implications
The implications of this research highlight the need for policymakers and practitioners to implement policies and regulations that enhance financial inclusion and foster the development of robust financial systems. By extending access to mainstream financial instruments and services, financial institutions can stimulate financial intermediation and support, thereby accelerating the development of the banking, debt and stock markets.
Originality/value
The study is robust to the use of several indicators of financial inclusion and financial development, and it forms part of the early studies that examine the close relationship between the two variables.
Details
Keywords
Eric B. Yiadom, Lord Mensah and Godfred A. Bokpin
This study aims to decompose financial development into its three key components (depth, access and efficiency) to investigate whether they can help to overturn the negative…
Abstract
Purpose
This study aims to decompose financial development into its three key components (depth, access and efficiency) to investigate whether they can help to overturn the negative impact of foreign direct investment (FDI) on the environment.
Design/methodology/approach
The study uses a dynamic panel of 43 economies from 1982 to 2018 and decomposed financial development into its three key components: depth, access and efficiency.
Findings
The results from the various estimations indicate that financial deepening and efficiency reduce environmental risk and can overturn the negative impact of FDI on the environment. In addition, the study finds that low levels of financial access worsen environmental risk but doubling financial access is likely to reduce it which makes the relationship between access and environmental risk non-monotonic. After splitting the data set into high and low financially developed economies, the study reports that FDI is more environmentally depressive among low financially developed economies.
Practical implications
The practical implications are that improvement in financial efficiency guarantees high returns on savings and investment and can reduce environmental risk. So, central governments should invest in financial technologies and formulate financial regulations through monetary and fiscal policies to enhance financial efficiency and depth.
Social implications
If inward FDI to Africa continues the business-as-usual trend, the environmental risk in the region may continue to rise, environmental conditionalities for FDI must be strengthened.
Originality/value
The study uses a comprehensive measure of financial sector development and decomposes financial development indicators to assess their efficacy in mitigating the relationship between FDI and environmental quality.
Details
Keywords
Eric B. Yiadom, Lord Mensah, Godfred A. Bokpin and Raymond K. Dziwornu
This research investigates the threshold effects of the interplay between finance, development and carbon emissions across 97 countries, including 50 low-income and 47 high-income…
Abstract
Purpose
This research investigates the threshold effects of the interplay between finance, development and carbon emissions across 97 countries, including 50 low-income and 47 high-income countries, during the period from 1991 to 2019.
Design/methodology/approach
Employing various econometric modeling techniques such as dynamic linear regression, dynamic panel threshold regression and in/out of sample splitting, this study analyzes the data obtained from the World Bank's world development indicators.
Findings
The results indicate that low-income countries require a minimum financial development threshold of 0.354 to effectively reduce carbon emissions. Conversely, high-income countries require a higher financial development threshold of 0.662 to mitigate finance-induced carbon emissions. These findings validate the presence of a finance-led Environmental Kuznet Curve (EKC). Furthermore, the study highlights those high-income countries exhibit greater environmental concern compared to their low-income counterparts. Additionally, a minimum GDP per capita of US$ 10,067 is necessary to facilitate economic development and subsequently reduce carbon emissions. Once GDP per capita surpasses this threshold, a rise in economic development by a certain percentage could lead to a 0.96% reduction in carbon emissions across all income levels.
Originality/value
This study provides a novel contribution by estimating practical financial and economic thresholds essential for reducing carbon emissions within countries at varying levels of development.
Details
Keywords
Lord Mensah, Eric B. Yiadom and Raymond Dziwornu
Does the issuance of Eurobonds carry enough information about favourable domestic conditions to warrant more FDI inflows? In this study, the authors investigate how FDI is…
Abstract
Purpose
Does the issuance of Eurobonds carry enough information about favourable domestic conditions to warrant more FDI inflows? In this study, the authors investigate how FDI is responding to the rising levels of Eurobonds in sub-Saharan African (SSA).
Design/methodology/approach
The study uses the system GMM model to set up a panel with all 17 SSA countries with Eurobonds. The dataset was transformed into time series, and the VAR model and Granger causality were used to diffuse the doubt of a possible bi-causal relationship between Eurobonds and FDI. Additionally, the authors use the impulse response function to test the behaviour of FDI to a one-time shock to Eurobonds.
Findings
The study reports that Eurobond levels matter in explaining FDI receipts. Specifically, the authors report that the issuance of Eurobonds leads to a favourable increase in FDI inflows. The authors transform our data into time series and use the VAR model and Granger causality test to diffuse the doubt of a possible bi-causal relationship between Eurobonds and FDI. The authors’ findings from this exercise suggest that two lag levels of Eurobond are a good predictor of future FDI flows. More also, the authors use the impulse response function to test the behaviour of FDI to a one-time shock to Eurobonds and report that a one-unit standard deviation shock to Eurobonds will cause FDI to swell up over at least 8 years.
Research limitations/implications
The study is limited in scope due to data availability. Future studies may consider using countries across the globe that have issued Eurobond to retest the current research objectives.
Practical implications
The study establishes grounds to suggest that the issuance of Eurobonds carry enough information to foreign investors in deciding on the location of FDI.
Originality/value
The study is uniquely opening a new frontier to the discussion on how one international capital can be used to bait other foreign capital. It also discusses signalling theory at the macro level.
Details
Keywords
Eric B. Yiadom, Valentine Tay, Courage E.K. Sefe, Vivian Aku Gbade and Olivia Osei-Manu
The performance of financial markets is significantly influenced by the political environment during general elections. This study investigates the effect of general elections on…
Abstract
Purpose
The performance of financial markets is significantly influenced by the political environment during general elections. This study investigates the effect of general elections on stock market performance in selected African markets.
Design/methodology/approach
Prior studies have been inconsistent in determining whether electioneering events negatively or positively influence stock market performance. The study utilized panel data set with annual observations from 1990 to 2020. The generalized method of moments (GMM) is employed to investigate the effect of electioneering and change in government on key stock market performance indicators, including stock market capitalization, stock market turnover ratio and the value of stock traded.
Findings
The study finds that electioneering activities generally have a positive impact on the performance of the stock market, whereas a change in government has a negative impact. As a result, the study recommends that stakeholders of the stock market remain vigilant and actively monitor electioneering events to devise and implement effective policies aimed at mitigating political risks during general elections. By adopting these measures, investor confidence can be significantly enhanced, fostering a more robust and secure investment environment.
Originality/value
The study investigates a neglected section of the literature by highlighting not only the effect of elections on stock market indicators but also possible change in government during elections.
Details
Keywords
Eric B. Yiadom and Abdallah Abdul-Mumuni
Pandemics and infectious diseases are almost becoming part of everyday human lives. In this study, the authors model the historical impact of pandemics on the various aspect of…
Abstract
Purpose
Pandemics and infectious diseases are almost becoming part of everyday human lives. In this study, the authors model the historical impact of pandemics on the various aspect of the stock market performance.
Design/methodology/approach
The Arellano and Bond (1991) GMM is used in estimating the empirical model to help solve possible endogeneity, heteroscedasticity and serial correlation problems in static panel data problems. Particularly, the system GMM is used to control for both the levels and the first difference equations.
Findings
The findings indicate that pandemics reduce the stock market turnover and the value of stock traded. But the stock market capitalization and the number of stock listings will not be affected within the pandemic period. Also, the authors report that the actual impact of the pandemic in terms of the number of people who die from the disease will badly influence all the four indicators of the stock market performances.
Research limitations/implications
This study opens up the frontiers to the use of panel modeling in this area of study which will influence future studies. Additionally, the authors have showcased that the number of deaths from communicable diseases (pandemics) disrupts all four measures of stock markets performance indicators; this finding will guide policymakers to develop a robust approach to fighting pandemics when they occur.
Originality/value
The study is unique in two ways. Unlike recent studies that focus on only the impact of Covid-19 on stock market performance, the authors build a 20-year panel of 41 emerging economies to capture the long-run dynamics. Again, the authors’ variables can capture the immediate and cumulative response of stock market performance to pandemics.
Details
Keywords
Josephine Ofosu-Mensah Ababio, Eric Boachie Yiadom, Daniel Ofori-Sasu and Emmanuel Sarpong–Kumankoma
This study aims to explore how institutional quality links digital financial inclusion to inclusive development in lower-middle-income countries, considering heterogeneities.
Abstract
Purpose
This study aims to explore how institutional quality links digital financial inclusion to inclusive development in lower-middle-income countries, considering heterogeneities.
Design/methodology/approach
The study uses dynamic generalized method of moments to analyze a balanced panel data set of 48 lower-middle- income countries (LMICs) from 2004 to 2022, sourced from various databases. It assesses four variables and conducts checks for study robustness.
Findings
The study reveals a positive link between digital financial inclusion and inclusive development in LMICs, confirming theoretical predictions. Empirically, nations with quality institutions exhibit greater financial and developmental inclusion than those with weak institutions, emphasizing the substantial positive impact of institutional quality on the connection between digital financial inclusion and inclusive development in LMICs. For instance, the interaction effect reveals a substantial increase of 0.123 in inclusive development for every unit increase in digital financial inclusion in the presence of strong institutions. The findings provide robust empirical evidence that the presence of quality institutions is a key catalyst for the benefits of digital finance in inclusive development.
Originality/value
This study offers significant insights into digital financial inclusion and inclusive development in LMICs. It confirms a positive relationship between digital financial inclusion and inclusive development, highlighting the pivotal role of institutional quality in amplifying these benefits. Strong institutions benefit deprived individuals, families, communities and businesses, enabling full access to digital financial inclusion benefits. This facilitates engagement in development processes, aiding LMICs in achieving Sustainable Development Goals.
Details
Keywords
Eric Boachie Yiadom and Lord Mensah
In this paper, we use empirical models to examine the main channel through which FDI escalates environmental risk. We explore whether countries with “weak” or better still low tax…
Abstract
Purpose
In this paper, we use empirical models to examine the main channel through which FDI escalates environmental risk. We explore whether countries with “weak” or better still low tax rate attract “dirty” FDI to deteriorate their environment
Design/methodology/approach
The analysis uses a 40-year panel to show that foreign direct investment (FDI) and tax policy matter in accounting for cross-country environmental risk.
Findings
Our sample finds support that the tax channel is the main medium through which FDI worsens environmental risk. By discomposing tax policy into low and high regimes, we report that countries that deliberately reform tax policy to bait FDI have higher environmental risk.
Social implications
A useful lesson from here is that using tax policy to lure FDI amounts to shortchanging capital risk for environmental risk.
Originality/value
The paper is unique because it identifies tax policy as a channel through which FDI affects the environment in Africa. Other studies overly simplifies the relationship between FDI and its impact on the environment, and it makes it difficult and ambiguous in offering specific policy direction.