Eric Osei-Assibey and Seth Obeng Adu
The purpose of this paper is to investigate the determinants of portfolio equity flows to the Sub-Saharan African (SSA) region over the period 1996-2010.
Abstract
Purpose
The purpose of this paper is to investigate the determinants of portfolio equity flows to the Sub-Saharan African (SSA) region over the period 1996-2010.
Design/methodology/approach
The study uses a sample of 14 SSA countries to estimate the baseline regression through employing the system generalized methods of moment dynamic panel estimation framework. To check the robustness of the estimation results, the study further analyses the data set using the random effects-generalized least squares (EGLS) estimator. The Random effects-generalized least squares estimator is also referred to a the Estimated Generalized least Squares (EGLS) estimator.
Findings
The paper finds a significant positive relationship between financial development and portfolio equity flows. Furthermore, while the study surprisingly finds trade openness to have a significant negative relationship, political stability is found to have a significant positive relationship with portfolio equity. To check for the robustness of these results, the authors further analyse the data set using the random EGLS estimator. The result of the EGLS estimator confirms that there is a robust positive relationship between financial development and portfolio equity flows to SSA. However, the results suggest that neither trade openness nor political stability is a robust determinant of portfolio equity flows to the sub-region.
Practical implications
Policy measures should aim at enhancing financial sector development, political stability and rule of law. A transparent judicial system that enhances rule of law and deepens democratic governance in countries in the sub-region is critical, but even more critical is deepening the financial sector, given the important role financial development plays in portfolio equity flows as suggested by the findings. A range of measures and appropriate policy responses are therefore needed for countries that have to manage macroeconomic and financial stability risks to deepen the financial sector.
Originality/value
Most studies on private capital flows to SSA have focussed on foreign direct investment flows with no or scanty evidence on the drivers of portfolio equity flows. This study fills this gap in the literature.
Details
Keywords
Simplice Asongu, Rexon Nting and Joseph Nnanna
In this study, we test the so-called “Quiet Life Hypothesis” (QLH), which postulates that banks with market power are less efficient.
Abstract
Purpose
In this study, we test the so-called “Quiet Life Hypothesis” (QLH), which postulates that banks with market power are less efficient.
Design/methodology/approach
We employ instrumental variable Ordinary Least Squares, Fixed Effects, Tobit and Logistic regressions. The empirical evidence is based on a panel of 162 banks consisting of 42 African countries for the period 2001–2011. There is a two-step analytical procedure. First, we estimate Lerner indices and cost efficiency scores. Then, we regress cost efficiency scores on Lerner indices contingent on bank characteristics, market features and the unobserved heterogeneity.
Findings
The empirical evidence does not support the QLH because market power is positively associated with cost efficiency.
Originality/value
Owing to data availability constraints, this is one of the few studies to test the QLH in African banking.