Raphael Kuranchie-Pong and Joseph Ato Forson
The paper tests the overconfidence bias and volatility on the Ghana Stock Exchange (GSE) during the pre-Covid-19 pandemic and Covid-19 pandemic period.
Abstract
Purpose
The paper tests the overconfidence bias and volatility on the Ghana Stock Exchange (GSE) during the pre-Covid-19 pandemic and Covid-19 pandemic period.
Design/methodology/approach
The study employs pairwise Granger causality to test the presence of overconfidence bias on the Ghana stock market as well as GARCH (1,1) and GJR-GARCH (1, 1) models to understand whether overconfidence bias contributed to volatility during pre-Covid-19 pandemic and Covid-19 pandemic period. The pre-Covid-19 pandemic period spans from January, 2019 to December, 2019, and Covid-19 pandemic period spans from January, 2020 to December, 2020.
Findings
The paper finds a unidirectional Granger causality running from weekly market returns to weekly trading volume during the Covid-19 pandemic period. These results indicate the presence of overconfidence bias on the Ghana stock market during the Covid-19 pandemic period. Finally, the conditional variance estimation results showed that excessive trading of overconfident market players significantly contributes to the weekly volatility observed during the Covid-19 pandemic period.
Research limitations/implications
The empirical findings demonstrate that market participants on the GSE exhibit conditional irrationality in their investment decisions during the Covid-19 pandemic period. This implies investors overreact to private information and underreact to available public information and as a result become overconfident in their investment decisions.
Practical implications
Findings from this paper show that there is evidence of overconfidence bias among market players on the GSE. Therefore, investors, financial advisors and other market players should be educated on overconfidence bias and its negative effect on their investment decisions so as to minimize it, especially during the pandemic period.
Originality/value
This study is a maiden one that underscores investors’ overconfidence bias in the wake of a pandemic in the Ghanaian stock market. It is a precursor to the overconfidence bias discourse and encourages the testing of other behavioral biases aside what is understudied during the Covid-19 pandemic period in Ghana.
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Joseph Ato Forson, Rosemary Afrakomah Opoku, Michael Owusu Appiah, Evans Kyeremeh, Ibrahim Anyass Ahmed, Ronald Addo-Quaye, Zhen Peng, Ernest Yeboah Acheampong, Bernard Bekuni Boawei Bingab, Emmanuel Bosomtwe and Akorkor Kehinde Awoonor
The significant impact of innovation in stimulating economic growth cannot be overemphasized, more importantly from policy perspective. For this reason, the relationship between…
Abstract
Purpose
The significant impact of innovation in stimulating economic growth cannot be overemphasized, more importantly from policy perspective. For this reason, the relationship between innovation and economic growth in developing economies such as the ones in Africa has remained topical. Yet, innovation as a concept is multi-dimensional and cannot be measured by just one single variable. With hindsight of the traditional measures of innovation in literature, we augment it with the number of scientific journals published in the region to enrich this discourse.
Design/methodology/approach
We focus on an approach that explores innovation policy qualitatively from various policy documents of selected countries in the region from three policy perspectives (i.e. institutional framework, financing and diffusion and interaction). We further investigate whether innovation as perceived differently is important for economic growth in 25 economies in sub-Saharan Africa over the period 1990–2016. Instrumental variable estimation of a threshold regression is used to capture the contributions of innovation as a multi-dimensional concept on economic growth, while dealing with endogeneity between the regressors and error term.
Findings
The results from both traditional panel regressions and IV panel threshold regressions show a positive relationship between innovation and economic growth, although the impact seems negligible. Institutional quality dampens innovation among low-regime economies, and the relation is persistent regardless of when the focus is on aggregate or decomposed institutional factors. The impact of innovation on economic growth in most regressions is robust to different dimensions of innovation. Yet, the coefficients of the innovation variables in the two regimes are quite dissimilar. While most countries in the region have offered financial support in the form of budgetary allocations to strengthen institutions, barriers to the design and implementation of innovation policies may be responsible for the sluggish contribution of innovation to the growth pattern of the region.
Originality/value
Segregating economies of Africa into two distinct regimes based on a threshold of investment in education as a share of GDP in order to understand the relationship between innovation and economic growth is quite novel. This lends credence to the fact that innovation as a multifaceted concept does not take place by chance – it is carefully planned. We have enriched the discourse of innovation and thus helped in deepening understanding on this contentious subject.
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The purpose of this paper is to provide a conceptual framework on the relationship between corruption and development. The paper demonstrates how the impact of corruption on…
Abstract
Purpose
The purpose of this paper is to provide a conceptual framework on the relationship between corruption and development. The paper demonstrates how the impact of corruption on economic development might vary substantially from sustainable development (SD).
Design/methodology/approach
A combination of literature-based analysis was employed by considering concepts from corruption and development. A synthesis of these two concepts leads to the development of the conceptual framework.
Findings
The findings shows that corruption originates from three main sources, and that the effect of corruption on development might differ depending on how it is conceptualized, but the spate of corruption is contingent on institutional quality and gains in previous development trajectory.
Originality/value
Relating the concept of corruption and SD and linking it to theories of development brings a sense of novelty. This paper has in its essence contributed to the conceptualization of the relationship between corruption and development which will help deepen understanding on this contentious subject. The framework will help to improve theory, research and practice in development studies and allied fields.
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Theresa Yaaba Baah-Ennumh and Joseph Ato Forson
The purpose of this paper is to assess the impact of artisanal small-scale mining (ASM) on sustainable livelihoods in the Tarkwa-Nsuaem Municipality of Ghana. The study seeks to…
Abstract
Purpose
The purpose of this paper is to assess the impact of artisanal small-scale mining (ASM) on sustainable livelihoods in the Tarkwa-Nsuaem Municipality of Ghana. The study seeks to answer the following questions: what is the impact of ASM on livelihoods in the Tarkwa-Nsuaem Municipality? What measures could be put in place to ensure the sustainability of livelihoods in the municipality?
Design/methodology/approach
A case study approach to inquiry was used in the study. The authors used interview guides (structured and unstructured) to collect primary data from a sample of 400 household heads, 19 institutions, six ASM firms, six mineral processing companies, and two gold-buying agents, and traditional authorities from the Tarkwa-Nsuaem Municipality.
Findings
The findings of the study indicate among other things that land has been rendered unproductive due to the inability of the dominant ASM firms to reclaim lands after mining. The workers’ exposure to cyanide and mercury makes them vulnerable to all manner of health risks, which is a threat to the sustenance of livelihoods. Owing to the unsustainable nature of mining activities, the future indicates not only increases in unemployment but also environmental degradation and health concerns.
Originality/value
The paper contains a significant new perspective of knowledge especially by contextualising sustainable development with ASM. This is an area that has largely been ignored by development researchers. The paper further emphasises the need for policy makers to evolve and embrace developmental approach that is intergenerational.
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Bernard Bekuni Boawei Bingab, Joseph Ato Forson, Anselm Komla Abotsi and Theresa Yabaah Baah-Ennumh
The incentive to strengthen university governance is espoused by a number of implications but among these three are very conspicuous: improve quality of university education…
Abstract
Purpose
The incentive to strengthen university governance is espoused by a number of implications but among these three are very conspicuous: improve quality of university education system, and thus provide students and the general public value for money; enhance the utilization of resources invested in university education; and nevertheless contribute significantly in human capital formation, guaranteeing effective and efficient public leadership and services to society. However, there are dearth studies on how this can be realized in sub-Saharan Africa, particularly Ghana. The purpose of this paper is to explore pertinent issues for desirable university governance and how it can be achieved in the sub-region drawing from the Ghanaian perspective.
Design/methodology/approach
This is a qualitative study seeking to explore the questions: what is needed to ensure desirable university governance? And how can it be achieved? Data were collected from primary sources and bolstered with secondary sources. In-depth interviews (structured and semi-structured guides) and documentary evidence were used to collect data from 19 participants in selected public and private universities in Ghana.
Findings
The study examines key governance issues such as funding, accountability, infrastructure, trust, and regulation. The paper further identifies and discusses dilemmas (weakness in legislative instruments, quality assurance, increased enrollment and self-regulation) institutions of higher learning have had to contend with in the discharge of their duty.
Social implications
In an effort to make a difference between poverty and wealth, knowledge becomes an indispensable means and university education is at the center of such knowledge. The call for public universities to be managed like businesses continuous to be as contentious as an issue, as the term governance and the discussion might not end any moment soon. For the proponents of this idea, public universities are no longer getting the needed resource support from the state and by implication the state does no longer view university education as a social good and, therefore, they must find their own way of operating by introducing reasonable fees to generate revenue. However, the school of thought that is against this idea thinks that university education must continue to be treated as a social good because it is geared toward the development of the country and is expensive and if not subsidized, who can afford. The poor and disadvantaged will be marginalized and so the state must directly or indirectly continue to fund university education in return for accountability.
Originality/value
This explorative study is a contribution to the discourse of university governance. It primarily focuses on issues that could serve as a catalyst in enhancing university education. This has important implications for equipping universities in Ghana and within the African sub-region with similar challenges for a better output to meet the development needs of its ailing economies and reposition it as a major firebrand to instill competition on the global arena of lifelong learning.
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King Carl Tornam Duho, Divine Mensah Duho and Joseph Ato Forson
This study explores the effect of income diversification strategy on credit risk and market risk of microfinance institutions (MFIs) in Ghana as an emerging market.
Abstract
Purpose
This study explores the effect of income diversification strategy on credit risk and market risk of microfinance institutions (MFIs) in Ghana as an emerging market.
Design/methodology/approach
The study is based on quarterly data of averagely 271 MFIs that have operated from 2016 to 2018. The dataset is unbalanced and pooled cross-sectional with 3,259 data points. The study measures the diversification strategy using income diversification indices, and accounting ratios to measure the other variables. We utilised the weighted least squares (WLS) approach to explore the nexus.
Findings
The findings show that income diversification is associated with better loan quality and credit risk management. Market risk increases with the level of income diversification of microfinance firms. It is evident that large MFIs can manage their credit risks well and can have a low default rate, depicting an overall U-shaped nexus. On the other hand, the effect of size on market risk is an inverted U-shaped. The effect of asset tangibility on credit risk is positively significant while the effect on market risk is negatively significant. High profitability enhances credit risk management leading to lower loan losses while in the case of diversified and profitable MFIs, they tend to invest more in government securities. The results suggest that MFIs that hold more cash and cash equivalents tend to have high loan loss provision and more government securities suggesting much attention should be paid to optimal cash management.
Practical implications
The results throw light on the credit risk and market risk profile of the firms and the effect of diversification strategies on them. The findings are relevant for effective macroprudential regulation, market regulation and prudential regulation of the microfinance sector.
Social implications
The findings reveal the nature of income diversification strategy of MFIs in emerging markets such as Ghana, pointing out how they affect the risk exposure of MFIs that lend to the pro-poor population.
Originality/value
This is a premier formal assessment of the nexus between income diversification strategies and risk management among MFIs that serve the pro-poor population in the emerging market context.
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Baah Aye Kusi, Joseph Ato Forson, Eunice Adu-Darko and Elikplimi Agbloyor
Financial crises (FC) remain a global threat to the financial stability of financial institutions and international bank regulatory capital requirement (IBRCR) by the Committee on…
Abstract
Purpose
Financial crises (FC) remain a global threat to the financial stability of financial institutions and international bank regulatory capital requirement (IBRCR) by the Committee on Banking Supervision provides mechanism for curbing the adverse effect of FC on financial stability. Hence, the purpose of this study is to provide, evidence on how IBRCR tones down the adverse FC effects on bank financial stability (BFS).
Design/methodology/approach
The study uses 102 economies between 2006 and 2016 in a two-step dynamic generalized method of moments model.
Findings
The results show that while FC and IBRCR negatively and positively impact BFS, respectively, it is observed that under the increasing presence of IBRCR, the negative effect of FC on BFS declines. Additionally, the results show that economies that maintain minimum IBRCR above 10.5% recommended by BASEL III are able to reinforce a significant reduction in the negative effect of FC on BFS.
Practical implications
These findings imply that in as much as financial crisis is injurious to BFS, regulators and policymakers can rely on IBRCR to avert the injurious effects of FC on BFS. Clearly, while IBRCR is necessary for reinforcing BFS through FC, bank managers who maintain IBRCR above the recommended 10.5% stands a better chance to taming the avert effect of FC on BFS. Additionally, economies that have not full adopted the BASEL minimum capital requirement may have to do so given its potential of dampening the adverse effect of FC on BFS.
Originality/value
The study presents an international perspective of how BASEL capital requirements can help tame global financial crisis using a global sample of 102 economies.
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Rakesh Kumar Verma and Rohit Bansal
This paper aims to identify various macroeconomic variables that affect the stock market performance of developed and emerging economies. It also investigates the effect of these…
Abstract
Purpose
This paper aims to identify various macroeconomic variables that affect the stock market performance of developed and emerging economies. It also investigates the effect of these factors on the stock markets of both economies. The impact of these variables on broad market indices and sectoral indices is investigated and compared too.
Design/methodology/approach
The publications for the study were retrieved from databases such as Emerald Insight, EBSCO, ScienceDirect and JSTOR using the keywords “Macroeconomic variables” and “Stock market” or “Stock market performance.” The result demonstrated a growing corpus of scholarly work in the domain of stock market. The study was carried out separately for each macroeconomic indicator. Given a large number of articles under consideration, the authors began by reading the titles and abstracts of all publications to identify those that were relevant. The papers are evaluated in Excel and the articles for review range from 1972 to 2021.
Findings
The authors found that gross domestic product (GDP), FDI (Foreign Direct Investment) and FII (Foreign Institutional Investment) have a positive effect on both emerging and developed economies’ stock market while gold price has a negative effect. Interest rates had a negative impact on both economies except for a few developing countries. The relationship with oil prices was positive for oil exporting countries while negative for oil importing countries. Inflation, money supply and GDP are the macroeconomic variables that have the same effect on sectoral indices as they do on broad market indices. The impact was sector-specific for the remaining variables.
Research limitations/implications
This paper gives an overview of relation and effect covering variety of macroeconomic variables and stock market indices. Still, there is a scope for further research to analyze the effect on thematic, strategy and sectoral indices. A longer time horizon with new variables, such as bank deposit growth rate, nonperforming assets of banks, consumer confidence index and investor sentiment, can be studied using high-frequency data. This research may help stakeholders adopt and manage their policies during a crisis or economic slump.
Practical implications
This study will assist investors, researchers and educators in the fields of economics and finance in understanding how macroeconomic factors affect the stock market. Furthermore, this study can guide in portfolio diversification strategy across multiple sectors by examining the impact of macroeconomic factors specific to sectoral indices. This paper provides insight into society and researchers since it integrates a number of macroeconomic variables and their interaction with the stock market. It may also help pension funds and mutual fund firms to hedge their funds and allocate equity portfolios.
Originality/value
With respect to India, this study looked at new macroeconomic variables and sectors. It contrasted the impact of these variables in developed and developing economies. The effect of broad and sectoral stock indexes was also investigated and compared. The authors examined how these variables responded during crisis and economic downturns by using articles from a longer time frame. This research also looked into how changing the frequency of data for the variables altered stock performance. This paper emphasized the need for more research into thematic, strategy and broad market indices, such as small-cap and mid-cap indices.