Search Results (95)

Utilising data from the selected companies listed on the Johannesburg Stock Exchange and using the Panel Autoregressive Distributed Lag (ARDL) specifically employing the Pooled Mean Group approach, this study examines the cointegrating and causal relationships among firm liquidity, performance and firm leverage. The results reveal a negative and significant long-run and short-run relationship between profitability and leverage. Conversely, higher leverage is found to diminish firm performance, consistent with trade-off theory implications regarding financial distress costs. On liquidity, results revealed a bidirectional long-run relationship among liquidity, leverage, and firm value as measured by Tobin’s Q. Also, liquidity plays a pivotal moderating role, where firms with stronger liquidity and profitability exhibit reduced reliance on external debt, highlighting the interplay between financial health and capital structure decisions. Additionally, a positive bidirectional relationship between Tobin’s Q and leverage suggests that growth opportunities and market valuation influence firms’ debt utilisation. The error correction terms confirm stable long-run equilibrium and moderate adjustment speeds. These results contribute to the understanding of optimal capital structure by integrating liquidity and performance factors and provide practical insights for corporate financial management and policy formulation. Full article

Economic crises significantly restrict corporate access to external financing, and regional differences in recovery capacity deserve close attention. This study examines the financial structure and debt of large enterprises in the Visegrád Four (V4) countries (Hungary, Czechia, Poland, Slovakia), focusing on firms with annual revenues above €10 million. Using data from 2021 to 2023, the analysis explores the relationship between corporate debt—including total debt and loan volumes—and regional economic characteristics at the NUTS 3 level. Financial indicators are assessed in comparison with regional productivity data and a sector-specific specialization index sourced from Eurostat. The analysis targets the post-COVID-19 recovery period, which significantly influenced corporate financial behavior. The results indicate that corporate debt increased sharply at the onset of the COVID-19 pandemic and subsequently declined, while remaining strongly concentrated in capital regions. Higher firm concentration and employment scale are associated with greater regional indebtedness, whereas stronger productive capacity is linked to lower reliance on external debt outside metropolitan cores. Overall, the findings highlight pronounced structural and regional heterogeneity, illustrating how spatial concentration and underlying regional characteristics shape corporate debt dynamics during periods of economic stress. Full article

This study investigates how liquidity and leverage shape financial performance in sub-Saharan Africa’s listed healthcare firms and concludes that internal liquidity capacity is a more reliable driver of performance than debt. Using an ex post facto design, the study examines 60 firm year observations for 12 listed healthcare and pharmaceutical firms across six countries over 2020–2024. It measures performance with return on assets (ROA), return on equity (ROE), and Tobin’s Q, while liquidity and leverage are proxied by current and debt–equity ratios. Fixed-effects panel regression with robust standard errors is employed after confirming heteroskedasticity and overall model significance through Wald tests. Liquidity exerts a positive and statistically significant impact on ROA (β = 0.003706, p < 0.01) and reinforces ROE in complementary estimations, demonstrating that stronger liquidity positions consistently enhance accounting-based financial performance in this capital-constrained sector. By contrast, leverage shows negative and statistically insignificant effects on ROA (β = 0.113666, p = 0.257), ROE (β = −1.42683, p = 0.109), and Tobin’s Q (β = −0.64563, p = 0.612), providing no evidence that higher debt improves either accounting returns or market valuation. Collectively, these results strongly support the primacy of internal financial flexibility over external borrowing for sustaining performance in sub-Saharan African healthcare firms and offer robust, region-wide empirical grounding for refining resource-based, pecking order, and trade-off arguments in healthcare capital structure debates. Full article

The interplay between fiscal and monetary policy is critical for small open economies exposed to global volatility, yet the regime-dependent nature of this transmission often remains underexplored. This study investigates whether the Hungarian economy operated under fiscal or monetary dominance from 2010 to 2024, a period marked by significant external shocks. Adopting a Markov Regime-Switching VAR (MS-VAR) framework tailored to an open-economy context, the research estimates state-dependent reaction functions and Impulse Response Functions (IRFs) for both the central bank and the fiscal authority. The model explicitly controls for exogenous geopolitical and economic crises and is validated through rigorous stationarity and regime-selection tests. Empirical results reveal that Hungary predominantly operated under fiscal dominance, with the fiscal authority exhibiting non-Ricardian behavior and no significant response to debt accumulation across the sample. Conversely, the Magyar Nemzeti Bank demonstrated regime-switching behavior: a “Passive” stance accommodating fiscal expansion from 2013 to 2019, followed by a forced shift to an “Active” regime in 2022 characterized by aggressive responses to inflation and high-interest rate volatility. These findings suggest that in small open economies, policy dominance is frequently dictated by external constraints, with the burden of macroeconomic stabilization falling disproportionately on monetary policy during crisis episodes. Full article

The institutional environment constitutes the external foundation for corporate development. In the process of China’s modernization, addressing the fiscal constraints on corporate green development is a key issue in advancing the green transformation of the economy, as well as a new approach to understanding the implementation gaps in environmental regulations and the challenges facing the development of green finance. This paper draws on new institutional economics theory to construct an analytical framework of “institutional incentives-behavioural choices-performance outcomes.” Using unbalanced panel data from 2008 to 2022 on listed companies in the Shanghai and Shenzhen A-share markets and prefecture-level cities, a two-way fixed effects model is employed to systematically examine the impact of fiscal vertical imbalances on the efficiency of corporate green development. Heterogeneity analysis reveals the ‘institutional sensitivity gradient’ phenomenon, with the inhibitory effects of fiscal vertical imbalances being particularly pronounced among institutionally sensitive groups such as labour and capital-intensive enterprises, heavily polluting enterprises, mature and declining stage enterprises, and eastern coastal enterprises. Fiscal vertical imbalances severely constrain the pace of green transformation in traditional enterprises and the growth of green industries. It is necessary to reconfigure the central-local fiscal relationship oriented toward green development, innovate ecological compensation and green debt coordination mechanisms, and establish an incentive-compatible institutional environment to resolve the “green paradox.” Full article

This paper examines the impact of fiscal policy responses on unemployment across EU countries from 2019 to 2024, a period marked by the COVID-19 pandemic as a shock event. A detailed monthly panel data set is used in this study, employing a fixed-effects estimation model with government spending, revenue, and debt as core variables, along with the COVID-19 dummy as a control variable. The findings reveal a strong association between government spending and revenue in reducing unemployment, aligned with countercyclical fiscal policy support. Conversely, increasing government debt is strongly linked to higher unemployment, indicating a risk of excessive borrowing that could hinder future labor market recovery. Moreover, uncertain external economic conditions, such as the COVID-19 pandemic, have further intensified labor market distortions. Finally, the results highlight that fiscal policies can effectively mitigate unemployment in the short term; however, excessive debt may pose challenges to long-term fiscal sustainability. This study underscores the importance of well-structured and timely coordinated fiscal policy frameworks that promote employment stabilization, while ensuring long-term debt sustainability. Full article

A special class of complex adaptive systems—biological and social—thrive not by passively accumulating patterns, but by engineering coherence, i.e., the deliberate alignment of prior knowledge, real-time updates, and teleonomic purposes. By contrast, today’s AI stacks—Large Language Models (LLMs) wrapped in agentic toolchains—remain rooted in a Turing-paradigm architecture: statistical world models (opaque weights) bolted onto brittle, imperative workflows. They excel at pattern completion, but they externalize governance, memory, and purpose, thereby accumulating coherence debt—a structural fragility manifested as hallucinations, shallow and siloed memory, ad hoc guardrails, and costly human oversight. The shortcoming of current AI relative to human-like intelligence is therefore less about raw performance or scaling, and more about an architectural limitation: knowledge is treated as an after-the-fact annotation on computation, rather than as an organizing substrate that shapes computation. This paper introduces Mindful Machines, a computational paradigm that operationalizes coherence as an architectural property rather than an emergent afterthought. A Mindful Machine is specified by a Digital Genome (encoding purposes, constraints, and knowledge structures) and orchestrated by an Autopoietic and Meta-Cognitive Operating System (AMOS) that runs a continuous Discover–Reflect–Apply–Share (D-R-A-S) loop. Instead of a static model embedded in a one-shot ML pipeline or deep learning neural network, the architecture separates (1) a structural knowledge layer (Digital Genome and knowledge graphs), (2) an autopoietic control plane (health checks, rollback, and self-repair), and (3) meta-cognitive governance (critique-then-commit gates, audit trails, and policy enforcement). We validate this approach on the classic Credit Default Prediction problem by comparing a traditional, static Logistic Regression pipeline (monolithic training, fixed features, external scripting for deployment) with a distributed Mindful Machine implementation whose components can reconfigure logic, update rules, and migrate workloads at runtime. The Mindful Machine not only matches the predictive task, but also achieves autopoiesis (self-healing services and live schema evolution), explainability (causal, event-driven audit trails), and dynamic adaptation (real-time logic and threshold switching driven by knowledge constraints), thereby reducing the coherence debt that characterizes contemporary ML- and LLM-centric AI architectures. The case study demonstrates “a hybrid, runtime-switchable combination of machine learning and rule-based simulation, orchestrated by AMOS under knowledge and policy constraints”. Full article

This study examines whether the external financing anomaly exists in an emerging-market setting. Using data on Korean listed firms from 1994 to 2023, we find that firms with higher net external financing subsequently earn significantly lower stock returns, consistent with behavioral misvaluation and market-timing explanations. A hedge portfolio long in net repurchasers and short in net issuers delivers an average annual return of about 12 percent. Decomposing financing flows show that both equity and debt issuance predict lower future returns, and further separating debt into bonds and loans reveals a stronger negative return association for bond-financed firms, consistent with greater sentiment sensitivity in market-based financing. We also document subsequent declines in operating performance, indicating that external financing aligns with temporary overvaluation rather than growth opportunities. Overall, our findings extend evidence on the external financing anomaly to an emerging market and provide further support for the behavioral interpretation of corporate financing decisions. Full article

Egypt has experienced a sharp rise in external debt over the past decade, increasing from USD 55.8 billion in 2015 to over USD 165.3 billion by 2023. Despite maintaining a debt-to-GDP ratio within internationally accepted thresholds (approximately 45% in 2023), the country faces mounting economic distress, including foreign exchange shortages, currency depreciation, and rising debt-servicing burdens. This study argues that Egypt’s crisis stems not from excessive borrowing but from ineffective debt management, particularly the misalignment between debt maturities and the economic returns of financed projects. Using annual data from 2010 to 2023—a period deliberately selected to capture Egypt’s post-2011 political and economic transition—the analysis applies a Vector Autoregression (VAR) model and Granger causality test to explore short-term interactions between short-term and long-term external debt, the exchange rate, and foreign reserves. While the small sample size limits long-term econometric inference, it provides meaningful insights into short-term debt dynamics and liquidity pressures characteristic of Egypt’s current economic phase. The results show that short-term debt exerts significant depreciative pressure on the currency, while long-term debt weakly undermines reserves when tied to non-revenue-generating projects. Policy recommendations emphasize improving debt maturity alignment, enhancing transparency, and linking debt servicing to productive investments. Full article

This paper estimates a nonlinear asymmetric dynamics model in the threshold panel data framework to study the extent to which the quality of governance, investment, and financial stability affect the impact of external debt on economic growth in 47 African countries from 2002 to 2022. As a general approach, we use the first-differenced GMM estimator, which allows both threshold variables and regressors to be endogenous. The results confirm that external debt becomes a drag on growth beyond a threshold of 53.49% relative to GDP. Furthermore, the results show that external debt appears to stimulate economic growth mainly by orienting it towards productive investment. In addition, the results show that better governance quality and financial stability accentuate the positive impact of external debt on economic growth. Based on the findings, this study proposes several policy recommendations. Full article

This study examines the determinants of capital structure in small agricultural enterprises in Serbia, with a particular emphasis on the external context shaped by circular economy (CE) indicators. Using a balanced panel of 254 firms between 2014 and 2022 (2286 firm-year observations), we estimate random-effects models with panel-corrected standard errors. The dependent variable is financial leverage, while explanatory variables include internal firm characteristics (liquidity, debt ratio, profitability, and asset tangibility) and territory-level CE indicators (municipal waste generated per capita, municipal waste recycling rate, and greenhouse-gas emissions from production activities). The model is statistically significant (χ² = 82.49; p < 0.01) and explains 33.7% of leverage variation. The results show that debt ratio positively and strongly relates to leverage, whereas profitability exhibits a negative and significant association, consistent with the pecking-order theory. Regarding the CE context, higher waste generation and higher GHG emissions are associated with lower leverage, while a higher recycling rate has a positive, marginal effect, suggesting that improved circular performance may ease access to external finance by lowering perceived risk among creditors. These findings highlight that environmental performance and local circularity conditions matter for financing decisions in agriculture. Policy implications include promoting CE practices and local recycling capacities to support sustainable financing. Future research should test dynamic specifications and enterprise-level CE metrics. Full article

Green innovation is essential for the sustainable transformation of enterprises. This study investigates how equity and debt financing dependence influence green innovation using panel data from manufacturing firms listed in Shanghai and Shenzhen between 2012 and 2022. We construct dynamic indicators of equity and debt financing dependence based on firms’ external financing relative to internal capital and assess their effects using panel regressions. Both financing types significantly enhance green innovation. Equity financing dependence increases green patent applications and green invention patent applications by approximately 1.4%, while debt financing dependence leads to gains of 0.9% and 1.1%, respectively. Financial reporting quality positively moderates these effects, with a stronger influence on debt financing dependence. High-quality reporting amplifies the impact of debt financing dependence by about 27% for green patent applications and 22% for green invention patent applications, while its effect on equity financing dependence is limited. Heterogeneity analysis reveals that equity financing dependence is most effective in small and young firms, while debt financing dependence has the strongest impact in medium-sized firms, particularly on green patent applications. The findings highlight the long-term influence of financing behavior on green innovation and inform green finance policy. Full article

Economic stability in emerging market economies is increasingly shaped by the interplay between global financial integration, domestic monetary dynamics, and asset price fluctuations. Yet, early detection of financial market disruptions remains a persistent challenge. This study constructs a Financial Stress Index (FSI) for Pakistan, utilizing monthly data from 2005 to 2024, to capture systemic stress in a globalized context. Using Principal Component Analysis (PCA), the FSI consolidates diverse indicators, including banking sector fragility, exchange market pressure, stock market volatility, money market spread, external debt exposure, and trade finance conditions, into a single, interpretable measure of financial instability. The index is externally validated through comparisons with the U.S. STLFSI4, the Global Economic Policy Uncertainty (EPU) Index, the Geopolitical Risk (GPR) Index, and the OECD Composite Leading Indicator (CLI). The results confirm that Pakistan’s FSI responds meaningfully to both global and domestic shocks. It successfully captures major stress episodes, including the 2008 global financial crisis, the COVID-19 pandemic, and politically driven local disruptions. A key understanding is the index’s ability to distinguish between sudden global contagion and gradually emerging domestic vulnerabilities. Empirical results show that banking sector risk, followed by trade finance constraints and exchange rate volatility, are the leading contributors to systemic stress. Granger causality analysis reveals that financial stress has a significant impact on macroeconomic performance, particularly in terms of GDP growth and trade flows. These findings emphasize the importance of monitoring sector-specific vulnerabilities in an open economy like Pakistan. The FSI offers strong potential as an early warning system to support policy design and strengthen economic resilience. Future modifications may include incorporating real-time market-based metrics indicators to better align the index with global stress patterns. Full article

This paper analyzes how two major economic downturns—a recession and a stagflation—affected convergence in the European Union (EU). Absolute and conditional convergence rates are estimated using ordinary least squares (OLS) semilog regressions based on cross-sectional data from 2004 to 2022. The study tests two hypotheses: there was no absolute convergence in the EU during either the recession or the stagflation period, and conditional convergence occurred during the recession but not during stagflation. The regression results indicate that neither hypothesis can be rejected. External variables—economic openness, inflation, and investment—were more influential during stable periods, whereas internal variables—debt, unemployment, and the control of corruption—had a greater impact during crises. These findings suggest that the EU was more institutionally prepared for the stagflation due to mechanisms developed after the financial crisis, but these tools proved less effective in addressing supply-side shocks. Full article

Corporate debt financing capacity is a critical factor for a firm’s survival and development. As climate change intensifies, examining the impact of climate risk on corporate debt financing is crucial for addressing climate change challenges. This study integrates data from the China Climate Risk Index (2007–2021) and A-share-listed companies on the Shanghai and Shenzhen stock exchanges, providing an in-depth analysis of the effects of climate risk on corporate debt financing and its underlying mechanisms. The research finds that climate risk significantly inhibits corporate debt financing, with a notable suppressive effect on both long-term and short-term debt financing. Mechanism tests indicate that climate risk suppresses corporate debt financing by weakening firm profitability, reducing asset turnover rates, increasing earnings uncertainty, and raising external financing costs. The moderating effect indicates that national climate risk responses mitigate the impact of climate risk on short-term debt financing while significantly suppressing long-term debt financing. Furthermore, corporate environmental information disclosure demonstrates a stronger inhibitory effect on short-term debt financing when climate risk is elevated. The study provides practical insights for firms and policymakers to address financing constraints under climate risks. Full article