Search Results (73)

This study examines the impact of board characteristics on capital structure decisions in the context of a transition economy, focusing on Algeria, where governance institutions are underdeveloped and the financial market remains immature. Using the Generalized Method of Moments (GMM) on a panel dataset of 120 firms over the period 2015 to 2019, we identify a U-shaped relationship between board size and leverage, and an inverted U-shaped relationship between board size and debt maturity. Furthermore, increased nationality diversity on boards is found to significantly reduce debt maturity. These findings highlight the critical role of board composition in shaping corporate financing strategies in transition economies and provide novel insights into corporate governance dynamics in a relatively underexplored institutional context. The results are particularly relevant for national entities such as COSOB and Hawkama El Djazaïr and may guide banking sector practices by promoting the integration of board governance criteria into credit evaluation processes. Full article

This paper highlights the importance of accounting for both the maturity structure of government debt and the composition of fiscal instruments when studying the macroeconomic effects of fiscal policy. Using a dynamic stochastic general equilibrium (DSGE) model featuring a debt maturity structure and six exogenous fiscal shocks spanning both the expenditure and revenue sides, we show that long-maturity debt systematically weakens the expansionary effects of fiscal policy under dovish monetary policy, particularly in response to increases in government purchases, government investment, and capital income tax cuts, where long-term financing leads to the significant crowding-out of private activity. In contrast, short-term debt financing yields output multipliers that often exceed unity. The maturity structure also alters the relative efficacy of fiscal instruments: while labor income tax cuts produce the largest multipliers under short-term debt, government purchases become more potent under long-term debt financing. We also show that the stark difference between short- and long-term debt becomes muted under a hawkish monetary regime. Our results have important policy implications, suggesting that the maturity composition of public debt should be carefully considered in the design of fiscal policy, particularly in high-debt economies. Full article

Achieving sustainable economic growth requires a careful balance between public debt accumulation and the macroeconomic stability necessary for long-term development. While public debt can support growth through productive public investment, excessive debt may crowd out private investment, raise borrowing costs, and undermine financial stability, ultimately threatening economic sustainability. In this context, the quality of institutions plays a pivotal moderating role by fostering responsible debt management and ensuring that debt-financed investments contribute to sustainable development. In this context, this study investigates the relationship between public debt and economic growth, with a focus on the moderating role of institutional quality (IQ). Utilizing an unbalanced panel of 115 countries over the period from 1996 to 2021, this study tests the hypothesis that robust institutional frameworks mitigate the negative impact of public debt on economic growth. To address potential endogeneity, this study employs the dynamic system Generalized Method of Moments (GMM) estimation technique. The results reveal that, although the direct effect of public debt on economic growth is negative, the interaction between public debt and IQ yields a positive influence. Furthermore, the results indicate the presence of a threshold beyond which public debt begins to exert a beneficial effect on economic growth, whereas its impact remains adverse below this threshold. These findings underscore the critical importance of sound debt management strategies and institutional development for policymakers, suggesting that effective government governance is essential to harnessing the potential positive effects of public debt on economic growth. Full article

As the debt stock level of Ghana continues to rise, partly due to the negative impact of COVID-19, a number of new taxes have been introduced in the 2021 budget statement alongside an upward adjustment of electricity tariff. State borrowing may significantly influence electricity tariff, as power generation and distribution are primarily undertaken by state-owned companies whose borrowing constitutes a substantial portion of the country’s overall debt. Hence, this paper assesses the impact of state debt on electricity tariff in Ghana post COVID-19. The autoregressive distributed lag (ARDL) model and error correction model (ECM) are employed to test for the Granger causality between state debt and electricity tariff. Other variables such as inflation rates, exchange rates, and net energy imports that have the propensity to influence electricity tariff are also examined. The results reveal that state debt has both short-term and long-term impacts on electricity tariff. Additionally, inflation rates, exchange rates, and net energy imports only have long-term impacts on electricity tariff. Meanwhile, exchange rates have short-term effects on state debt. The findings imply that effective debt management policies should be implemented by the government to reduce borrowing, particularly when such borrowing is not invested into projects that can repay the debt at maturity. This study demonstrates that all the accumulated debt prior to and during the COVID-19 era is causing a significant increase in Ghana’s electricity tariff. This provides an empirical clue as to what the situation is likely to be in other developing countries. Full article

This study examines the effects of internal governance mechanisms on the issuance of green bonds and investigates whether firms issuing green bonds exhibit distinct corporate governance characteristics, especially regarding board gender diversity and corporate social responsibility (CSR) committees. The analysis is based on a sample of 64 green bond announcements between 2013 and 2022. Based on the Generalized Least Squares Regression model, empirical results show that the presence of a CSR committee is positively and significantly associated with the issuance of green bonds. In other words, companies with a CSR committee are more likely to issue green bonds. In addition, companies with a lower debt ratio are more likely to issue green bonds. Full article

Taxes represent a significant expense for many companies, prompting a strong incentive to minimize tax liabilities through strategies known as tax avoidance. This research explores the impact of tax avoidance and tax risk disclosure on the cost of debt among companies listed on the Iraqi Stock Exchange. This study analyzes data from 33 firms from 2016 to 2021, employing multivariate linear regression and the generalized least squares (GLS) model to test the hypotheses. The findings indicate that tax avoidance significantly and positively affects the cost of debt, suggesting that firms engaging in tax avoidance may experience greater borrowing costs. Additionally, tax risk disclosure is shown to directly and significantly influence the cost of debt. Importantly, this study reveals that tax risk disclosure negatively moderates the relationship between accrual tax avoidance and the cost of debt, indicating that higher tax risk disclosure can reduce uncertainties associated with tax avoidance, reducing borrowing costs. These results imply that tax avoidance and its influence on corporate debt levels can affect the overall risk profile of a country's financial system. Understanding this relationship is crucial for governance measures aimed at managing tax risks effectively. Given the limited research in this area, this study contributes to the literature by examining how tax risk and tax avoidance relate to the cost of debt in an emerging market context. Full article

The existing literature on government debt has predominantly focused on its influence on economic growth, with relatively limited attention paid to its ecological implications. Government debt, as an important financial tool, plays an essential role in improving the quality of economic development, yet its impact on sustainable governance remains underexplored. Against this backdrop, this paper investigates the relationship between government debt and carbon reduction using a sample of Chinese listed companies from 2010 to 2023. After excluding missing and financial firm data, our final sample includes 26,535 observations. We obtained these data from the China Security Market Accounting Research (CSMAR) database and the Wind database. This study utilizes ordinary least squares (OLS) as the baseline regression and identifies a significant positive impact of government debt on carbon emissions. Further, the moderating analysis suggests that the positive impact of government debt on carbon reduction is particularly stronger in state-owned (SOEs) and heavily polluting enterprises. To ensure the robustness of these findings, we also use fixed-effects models and the generalized method of moments (GMM), validating the consistency of the findings. This research provides critical practical and theoretical insights for regulators and adds to the prevailing body of literature on emissions reduction. Full article

This study investigates the impact of Central Bank interventions on the pricing dynamics of select stock markets. The research utilizes the instrumental variables three-stage least square (3SLS) model approach. It analyses the effects of variations in the Federal Reserve’s balance sheet size across three distinct intervention scenarios: the 2008–2013 Great Recession, the 2020–2021 COVID-19 pandemic periods, and an overarching analysis spanning these timelines. Our methodology includes estimations of the Seemingly Unrelated Regression Equations (SURE), and the results are robust under the two-step Generalized Method of Moments (GMM). Our findings indicate that changes in the size of the Fed’s balance sheet correlate significantly with the pricing of principal U.S. equity market indices. This correlation reflects a time-dependent effect emanating from the Fed’s balance sheet expansion, marking a growing divergence between the adaptability of pricing mechanisms in equity and debt markets. Notably, the Federal Reserve’s interventions during the COVID-19 crisis are associated with an increase of approximately 0.0403 basis points per billion in treasury yields. This research makes a significant contribution to the understanding of financial asset pricing, particularly by elucidating the extent to which interventions in government debt securities engender price distortions in certain equity markets. Full article

Public debt plays a major role in financing projects that support economic growth and sustainable development. As governments may choose between domestic and external borrowing, a comprehensive assessment of their effects would support this choice. Our study provides an integrative view of economic and social outcomes and compares, through externalities, the impacts of external and domestic public debt as methods of financing development, with a focus on the Cameroonian economy. Utilizing a dynamic computable general equilibrium (CGE) model and a microsimulation analysis, we find that domestic debt has more advantages for Cameroon compared to external debt, as it increases the large-scale economic impact by improving household welfare, boosting GDP growth, and progressively reducing poverty and inequality. It is therefore recommended that the Cameroonian government focus on increasing the use of domestic debt as a method of financing development by implementing policies that support domestic saving and promote the development of domestic debt markets. Full article

This study reviews various financing solutions available for fisheries and aquaculture development in Caribbean small island developing states (SIDS) and Barbados, Grenada, and St. Vincent and the Grenadines. Previously identified financing needs within the fisheries and aquaculture sectors have been matched with the most suitable financing mechanisms. However, the use of blue levies is recommended and applicable in almost every scenario, as they allow these sectors to drive their own development in financing research and conservation projects to their own benefit. The use of “blue tokens” with sufficiently low repayment coupons allows development projects to gather public support for fisheries, thereby increasing the likelihood of the project being successful through community buy-in. The possibility of natural capital being traded as public equities as “Natural Asset Companies” provides the opportunity for development projects to fund themselves. The review concludes that natural capital can be leveraged as the base through which public-private partnerships (PPPs) can facilitate optimal delivery of ecosystem services, benefit multiple stakeholders, and provide numerous development opportunities. An enabling environment for debt and lending with low-interest loan repayments is also applicable to almost every scenario, as it facilitates access to capital finance for infrastructure development and the acquisition of increasingly sustainable fishing equipment. Steps towards generating an enabling environment for financing fisheries and aquaculture in the Caribbean region are also discussed. The establishment of dedicated financing institutions, PPPs, and sufficient data reporting infrastructure for the fisheries and aquaculture industry are essential for driving development in these sectors. Likely, the largest limiting factor in financing Caribbean fisheries and aquaculture industries is a lack of awareness of the range of finance and financing mechanisms available to stakeholders, as well as an enabling environment for financing blue Economy sectors. This review is thus intended to aid financing institutions, Blue Economy developers, and specifically Caribbean fisheries and aquaculture stakeholders and Caribbean governments by raising awareness of the financing mechanisms available, encourage the incorporation of their use in the fisheries and aquaculture industries in the Caribbean, and encourage policymakers to create an enabling environment for financing development in these crucial sectors. Full article

This study was conducted using the dynamic panel two-stage least squares system generalized methods of moments (2SLS-system GMM) to examine how UK companies made capital structure decisions during the COVID-19 pandemic. Contrary to expectations, firms opted to reduce their debt exposure during the pandemic. Tobin’s Q was the most significant determinant of capital structure, as it mitigated total debt by 0.25% during the pandemic. This result aligns with the pecking order theory, suggesting that firms prefer internal financing over debt. Simultaneously, combined scores (ESG) and the decomposed environment (E), social (S), and governance (G) scores individually and paired with the COVID-19 dummy negatively affected short-term debt by 0.012%, 0.015%, 0.0068%, and 0.00434%, respectively. This study’s results highlight the significance of firms adopting less debt-heavy policies during periods of heightened uncertainty to effectively manage financial risk. This result underscores the importance of prudent financial risk management strategies for navigating the challenges posed by sudden crises. Our findings suggest that a complex interplay of factors influences capital structure decisions during crises, with debt reduction and prudent risk management emerging as critical strategies. Full article

In the context of implementing the new agricultural strategy, “Generation Green 2020–2030”, Moroccan agricultural SMEs are benefiting from specific lines of credit and significant financial incentives. This study focuses on assessing how the capital structure influences the financial performance of these medium-sized enterprises, based on an analysis of a sample of 30 agricultural SMEs over a period of 4 years from 2019 to 2022. This examination delves into the effects of debt, government subsidies, and their combined impact on the return on equity and assets of these SMEs. The findings reveal a significant negative correlation between capital structure and the financial performance of agricultural SMEs. This underscores the importance of advocating for self-financing in line with the pecking order theory, as debt appears to significantly diminish asset returns. Additionally, although government subsidies alone do not significantly influence enterprise profitability, their interplay with capital structure—especially long-term debt—exhibits a detrimental moderating effect on asset returns. This suggests that subsidies play a significant role in moderating the relationship between capital structure and SME financial performance, albeit with an adverse effect. Full article

This paper discusses the financial determinants of the efforts of local government units (LGUs) to invest in the area of energy transition (ET). The main objective is to verify the links between the scale, directions, and funding sources of LGUs’ investments in ET and their budgetary situation described by the level of income independence, budget result, and debt level. The general research hypothesis assumes that the ET investment activity of LGUs is associated with their financial situation. The analysis covers the period 2019–2022 and uses data from the questionnaire-based survey conducted in 2023 among 181 LGUs in the Podkarpackie region in southern Poland. Non-parametric tests were employed to verify the association between the LGUs’ ET investment activity and their financial situation: the Chi² test, the Mann–Whitney U test, the Kruskal–Wallis test, and the Kendall’s Tau correlation. Financial aspects were shown to influence the scale of municipal ET investments, as well as the type of projects implemented. Among the analysed financial indicators, the debt level was the most important constraint for LGUs to make their own ET investments. The debt level not only determined the scale of municipal ET investment, but also influenced decisions on the type of investments. Full article

The amount of local government debt has an important impact on the economic and social sustainability of a country. The rapid increase in local government debt in China over the past decade and the associated risks have profound implications for financial and economic sustainable development. While existing research has investigated governmental strategic interactions of tax and spending, little attention has been given to the spatial interaction of local government debt. This study employs Two-Regime Spatial Lag Models to investigate the spatial interaction of the debt among China’s 332 prefectural-level local governments over the period of 2015 to 2019. The findings show significant interaction effects between neighbouring governments, both in the acquisition and utilisation of debt quotas, and the interaction during the acquisition process is higher than that during the utilisation process. In addition, the interaction between neighbouring governments within the same province is more pronounced than that between governments adjacent but located in different provinces. Furthermore, the interaction of special debt is more manifest than that of general debt. These findings pass various robustness tests. Additionally, the mechanism test shows that fiscal competition is one of the driving forces behind the observed interdependence of local governments’ debt strategies. Full article

The aim of this study is to analyze which factors affect the profitability of banks in the eurozone and to make recommendations for supporting them to achieve higher levels of profitability in particular eurozone countries. The banks operating in the eurozone are specific that they are under one monetary policy. The main purpose of the banks’ profitability analysis is to identify main bank-specific and macroeconomic determinants and help bank management to more fully comprehend their importance of bank-specific determinants and macroeconomic determinants’ influence when measuring and evaluating bank profitability. For the purpose of this research, we analyze the impact of bank-specific determinants (NPL, CIR, NIM, NIF and NIT) and macroeconomic determinants (GDP, INF, UNM and DEBT) on bank profitability in the eurozone for the period of 2015–2020 using a random effects model, fixed effects model, and the general method of moments (GMM). This empirical research analyzed quarterly data series from Eurostat for eighteen countries in the eurozone. We came to the results that on the eurozone-level NPL, the cost-to-income ratio has a negative impact on the banks’ profitability, while the net interest income to the operating income, the net income for trading assets to the operating income and the net fee and commission income to the operating income have a positive impact on the banks’ profitability. Considering the macroeconomic variables, we found a positive impact only in the case of GDP, while the inflation rate, unemployment rate and gross government debt have shown a negative impact on the banks’ profitability. The main contribution of this study implies different panel techniques with two uncommonly used macroeconomic variables such as the unemployment rate and debt ratio. The results on the country level differ from country to country and these findings can give a lead to policy makers on the national level on how to enhance the banks’ profitability levels. Full article