How corruption affects loan portfolio quality in emerging markets?

2016 ◽  
Vol 23 (4) ◽  
pp. 769-785 ◽  
Author(s):  
Khemaies Bougatef
Keyword(s):  
Economic Development ◽  
Panel Data ◽  
Emerging Market ◽  
Emerging Market Economies ◽  
Loan Portfolio ◽  
Data Set ◽  
Content Type ◽  
Market Economies ◽  
Asset Quality ◽  
The Impact

Purpose The purpose of this paper is to empirically investigate the impact of corruption on the asset quality of banks operating in emerging market economies over the period 2008-2012. This issue is of crucial importance given the role of banking systems in economic development and the worldwide spread of corruption. Using panel data set of 22 countries, our findings provide a strong and robust support to the hypothesis according to which corruption aggravates the problem with non-performing loans. This evidence suggests that corruption may hinder economic development through the misallocation of loanable funds. Other results are as follows: economic expansion and capitalization level improve the loan portfolio quality. By contrast, unemployment deteriorates the debt servicing capacity of borrower which in turn contributes to lower the bank asset quality. Design/methodology/approach The authors use panel data techniques on a sample of 22 emerging market economies over the period 2008-2012 to test the relevance of corrupt practices on the soundness of banks. Findings Their findings reveal a robust positive relationship between corruption and non-performing loans (NPLs). This evidence corroborates previous results on the detrimental effect of corrupt practices on financial development. The subdivision of our main sample into two groups on the basis of the level of corruption reveals the importance of the effectiveness of collateral and bankruptcy laws in reducing the effect of corruption on loan portfolio. Moreover, we find that the accessibility to more credit information is helpful only in low corrupt countries since it enhances the soundness of banks by facilitating lending decisions. Originality/value The novelty of this paper is to take into consideration the implications of corruption in investigating the determinants of credit risk.

scholarly journals The integration between and common prosperity of government and market: China's experience of economic development

2020 ◽  
Vol 3 (2) ◽  
pp. 353-366
Author(s):  
Leming Hu
Keyword(s):  
Economic Development ◽  
Market Economy ◽  
Economic Transition ◽  
Emerging Market ◽  
Emerging Market Economies ◽  
Content Type ◽  
Market Economies ◽  
Economic Liberalism ◽  
Government And Market ◽  
The Relationship

PurposeThe relationship between government and market is the key to the economic development performance of market economy countries. Due to the limits such as the state/market dichotomy, the focus on static allocation efficiency and the ignorance of the diversity of the market economy and the relationship between government and market, economic liberalism and state interventionism can hardly position and explain the role and evolution of government and market in the real world accurately.Design/methodology/approachChina’s economic transition has always adhered to the reform direction of the socialist market economy and the development goal of a modern socialist country as well as the symbiosis and positive and progressive evolution of government and market, blazing a “third way” in handling the relationship between government and market.FindingsThe “China’s experience” shows that the key for emerging market economies to achieve good economic development performance lies in whether they can build a new relationship of the mutual integration between and common prosperity of government and market regarding target selection, production organisation, technological innovation, institutional change and regulatory adjustment.Originality/valueThe second part of this paper analyses the inherent defects of economic liberalism and state interventionism as well as the reasons why they can hardly be adopted as the theoretical guidance for emerging market economies to handle the relationship between government and market. The third part analyses how China has transcended the inherent thinking of liberalism and interventionism and shaped the new relationship between government and market through goal-oriented, active and progressive, two-way interactive exploration and practice to ensure the success of China's economic transition.

Innovative product marketing strategy: multinational companies in Bangladesh

2019 ◽  
Vol 13 (4) ◽  
pp. 656-671
Author(s):  
Maria Fregidou-Malama ◽  
Ehsanul Huda Chowdhury ◽  
Akmal S. Hyder
Keyword(s):  
Emerging Market ◽  
International Marketing ◽  
Multinational Companies ◽  
Emerging Market Economies ◽  
Local Market ◽  
Data Set ◽  
Content Type ◽  
Market Economies ◽  
Marketing Literature ◽  
Product Marketing

Purpose This paper aims to deal with international marketing of products, analyzing how adaptation/standardization and network development are achieved when marketing products in Bangladesh. Design/methodology/approach By applying a qualitative method, the study was conducted at four multinationals, British American Tobacco, Perfetti Van Melle, Tetrapak and Reckitt Benckiser, operating in Bangladesh. Data were collected through semistructured interviews, direct observation and official documents. The analysis was conducted through construction of themes that were identified from the data set. Findings The study demonstrates that business relationships related to a local market should be adapted to customer preferences. The research suggests that a balanced combination of product quality and development of new, innovative products adapted to the needs of the market and the customers establishes trust and networks. Cultural and market context were found to influence multinational companies (MNCs)s to standardize the quality of the products and adapt marketing mix components to the needs of consumers. Research limitations/implications The paper contributes to international marketing literature with a model of product marketing based on context, trust, networks and adaptation/standardization. The model introduces the cultural dimension of femininity/ masculinity and the innovation of products and market structure. The study is limited to one emerging market. Further studies should explore other emerging market economies and MNCs. Practical implications The results suggest that to meet the challenges of emerging market economies and achieve success, managers should take people and market needs into consideration. Originality/value This paper extends product marketing literature by presenting a context-based model for MNCs’ product marketing.

Working capital management and firm’s valuation, profitability and risk

2019 ◽  
Vol 15 (2) ◽  
pp. 191-204 ◽  
Author(s):  
Ben Le
Keyword(s):  
Firm Performance ◽  
Panel Data ◽  
Emerging Market ◽  
Firm Valuation ◽  
Capital Management ◽  
Working Capital ◽  
Data Set ◽  
Working Capital Management ◽  
Content Type ◽  
The Impact

PurposeThe purpose of this paper is to examine the effects of working capital management on firm valuation, profitability and risk.Design/methodology/approachThe paper uses a panel data set of 497 firms covering the period 2007 to 2016. The authors test the effects of working capital management on firm valuation, profitability and risk using the panel data methodology that includes firm and year fixed effects regressions.FindingsThe authors find a significantly negative relationship between net working capital (NWC) and firm valuation, profitability and risk. The results suggest that, in managing working capital, firm managers must make a trade-off between their objectives for profitability and risk control. Working-capital management is of particular importance in firms with less access to capital; it is also important when firms are expanding their investments during periods of economic recovery.Originality/valueThis paper contributes to the literature in several ways. First, to my knowledge, it provides the most comprehensive investigation, to date, on the relationship between working capital management and firm valuation, profitability and risk in an emerging market. Second, this study documents the existence of an optimal level of NWC in an emerging market. Third, firm performance, as measured in both market and accounting value, can be improved with efficient working capital management. Finally, the study includes the impact of the business cycle in an analysis of the effects of working capital management on firm performance.

The impacts of income inequality on the gross domestic product under direct taxation: evidence from emerging market economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmet Eren Yıldırım ◽  
Mete Dibo
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Income Inequality ◽  
Gross Domestic Product ◽  
Emerging Market ◽  
Domestic Product ◽  
Emerging Market Economies ◽  
Content Type ◽  
Market Economies ◽  
Direct Taxation

PurposeThis study analyzes the impacts of income inequality after direct taxation on the gross domestic product as a fiscal policy tool in the development process.Design/methodology/approachThe model of the study is based on Munielo-Gallo and Roca-Sagales (2013), which examined the fiscal policy, income inequality and economic growth simultaneously. The study uses two models to analyze the relationship between income inequality and gross domestic production under direct taxation by employing autoregressive distributed lag (ARDL) model for selected emerging market economies.FindingEmpirical results reveal a negative long-run relationship between variables in some countries in line with the literature, despite a positive relationship in others. Moreover, the results exhibit the negative impact of income inequality after direct taxation on the gross domestic product decreases.Originality/valueResults of the study highlight the importance of direct taxation on income inequality concerning the reflects on economic growth. It suggests that when the income distribution is fairer, it may positively affect the gross domestic product. The study provides a new perspective to the related literature by investigating the role of income inequality under direct taxation for gross domestic product.

scholarly journals Liquidity regulations and bank behavior: An emerging markets perspective

2021 ◽  
Vol 10 (4, special issue) ◽  
pp. 194-211
Author(s):  
Tafirei Mashamba
Keyword(s):  
Emerging Markets ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Emerging Market Economies ◽  
Basel Iii ◽  
Market Economies ◽  
Coverage Ratio ◽  
The Impact

The 2007 to 2009 global financial crisis significantly affected the funding structures of banks, especially internationally active ones (Gambacorta, Schiaffi, & Van Rixtel, 2017). This paper examines the impact of liquidity regulations, in particular, the liquidity coverage ratio (LCR), on funding structures of commercial banks operating in emerging markets over the period 2011 to 2016. Similar to Behn, Daminato, and Salleo (2019) who developed a dynamic partial equilibrium model to examine capital and liquidity adjustments, this paper develops three dynamic error component adjustment models and estimates them using the two-step system generalized method of moments (GMM) estimator to analyze funding adjustments adopted by banks in emerging markets in response to the LCR requirement. The results revealed that banks in emerging markets responded to binding liquidity regulations by increasing deposit, equity as well as long-term funding. In terms of the magnitude of response, deposit funding was found to be more responsive to the LCR rule while the elasticity of equity and long-term funding to the LCR specification was found to be weak. The weak response of equity and long-term funding to liquidity standards was attributed to low levels of capital market development in emerging markets (Bonner, van Lelyveld, & Zymek, 2015). By and large, the results suggest that Basel III liquidity regulations have been effective in persuading banks in emerging market economies to fund their business activities with stable funding instruments. Based on this evidence, the study supports the adoption of Basel III liquidity regulations in emerging markets. Moreover, policymakers in emerging market economies should monitor competition for retail deposits to safeguard the benefits of the LCR rule and pay more attention to developing capital markets.

Financial liberalization and the behavior of reversals in emerging market economies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ali Fayyaz Munir ◽  
Shahrin Saaid Shaharuddin ◽  
Mohd Edil Abd Sukor ◽  
Mohamed Albaity ◽  
Izlin Ismail
Keyword(s):  
Emerging Markets ◽  
Financial Liberalization ◽  
Emerging Market ◽  
Asia Pacific ◽  
Emerging Market Economies ◽  
Investment Strategies ◽  
Content Type ◽  
Market Economies ◽  
Contrarian Strategy ◽  
Fund Managers

PurposeThis paper investigates the behavior of contrarian strategy payoffs under varying degrees of financial liberalization in the context of Asia-Pacific emerging market namely China, India, Indonesia, Korea, Malaysia, Pakistan, Philippines and Thailand for the period 1997–2017. These markets represent economies that display a gradual change in the degree of financial liberalization instead of fully opening their markets to foreign investors at once.Design/methodology/approachUsing a daily dataset of 2,468 firms and four different measures of the degree of financial liberalization, the paper employs portfolio formation, panel regressions and binary modeling methods to reveal the impact of partial and complete financial liberalization on contrarian returns.FindingsThis paper documents a negative relationship between the degree of financial liberalization and contrarian strategy payoffs. The results further indicate that small-sized emerging markets reveal more significant and higher contrarian returns as compared to their larger counterparts. Moreover, the returns are significantly higher during negative market states, higher volatility and crises periods. The study findings are consistent with the investor-base broadening hypothesis.Practical implicationsThe findings may serve as a useful input for investors and fund managers to devise contrarian investment strategies in emerging market economies. Together, the study provides additional insights for policymakers in managing financial liberalization and integration policies within their respective countries.Originality/valueThis study provides a novel viewpoint by examining the relationship between the degree of financial liberalization and contrarian strategy payoffs. The authors contribute to the existing debate by shifting the discussion to the investor-based broadening argument in which small and less liberalized emerging markets offer opportunities for investors and fund managers to produce abnormal contrarian returns that cannot be earned by other conventional investment strategies.

Board gender diversity and US corporate bonds

2019 ◽  
Vol 15 (5) ◽  
pp. 771-791 ◽  
Author(s):  
Renee M. Oyotode-Adebile ◽  
Zubair Ali Raja
Keyword(s):  
Panel Data ◽  
Propensity Score ◽  
Design Methodology ◽  
Gender Diversity ◽  
Data Set ◽  
Content Type ◽  
Gender Diverse ◽  
Board Gender Diversity ◽  
The Impact ◽  
Women Participation

Purpose The purpose of this paper is to examine the impact of board gender diversity on bond terms and bondholders’ returns. Design/methodology/approach The authors perform pooled OLS regression, simultaneous regressions and propensity score matching to a panel data set of bond data for 319 US firms from 2007 to 2014. Findings The authors find that firms with gender-diverse boards have lower yields, higher ratings, larger issue size and shorter maturity. They also find that bondholders require fewer returns from firms with gender-diverse boards. However, the effect is more pronounced when women, constitutes at least 29.67 percent of the board. Originality/value This analysis supplements the findings that board gender diversity is essential for bondholders. It shows that bondholders should look at board gender diversity as a criterion to invest because bonds issued by firms with gender-diverse board have less risk. For practitioners, this study shows that more women participation on boards leads to a reduction in borrowing costs.

Do board interlocks support monitoring effectiveness?

2019 ◽  
Vol 42 (11) ◽  
pp. 1278-1296 ◽  
Author(s):  
Franziska Handschumacher ◽  
Maximilian Behrmann ◽  
Willi Ceschinski ◽  
Remmer Sassen
Keyword(s):  
Panel Data ◽  
Resource Dependence ◽  
Pay For Performance ◽  
Resource Dependence Theory ◽  
Risk Governance ◽  
Data Set ◽  
Content Type ◽  
Board Interlocks ◽  
Performance Sensitivity ◽  
The Impact

Purpose This paper aims to investigate the relationship between board interlocks and monitoring effectiveness for listed German companies in a context of risk governance. While agency-theory and resource-dependence-theory suggest a positive association between board interlocks and monitoring effectiveness, reasons such as limited temporal resources of busy board members may suggest a negative association. Design/methodology/approach By using panel data regression, the authors examined the association between board interlocks and monitoring effectiveness, which was approximated by excessive management compensation, pay-for-performance-sensitivity and CEO turnover-performance-sensitivity. The data set comprises 3,998 directorships for 132 listed German companies covering the period 2015-2017. Findings The authors find that board interlocks are associated with not only a more excessive management pay and less performance-sensitive turnover but also a higher pay-for-performance-sensitivity. Originality/value The study examines the impact of multiple directorships based on a German panel data set that includes both multiple appointments of members to national supervisory boards and all other appointments to national and international executive and supervisory bodies. The authors compile three measures to operationalize monitoring effectiveness.

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