International Journal of Applied Economics, Finance and Accounting

Asymmetric effects of exchange rate and oil price on export performance and economic growth in WAMZ

Kazeem Abimbola Sanusi — 2024-11-29

The purpose of the study is to explore the effects of exchange rate and oil price asymmetries on export performance and economic growth in the West African Monetary Zone (WAMZ). The study uses monthly data from 1970 to 2022. The study makes use of the asymmetric ARDL approach. Our findings show that there exists a long-run relationship between oil price, exchange rate, export performance, and output growth. We find that depreciation of the exchange rate and increases in oil prices generally hinder the economic prospects of these nations. Furthermore, it was found that currency depreciation did not significantly improve the export performance of these nations, primarily due to the largely stagnant manufacturing sectors and other challenges such as infrastructural decadence that these nations face. The findings imply that these countries, as well as the rest of Africa, still need to implement sincere and significant economic changes. We need to make large-scale investments in infrastructure development, revive the dormant manufacturing sector, actively and transparently combat corruption at all levels, and take other actions to stabilize their currencies and boost export performance, all of which will contribute to economic prosperity. We also recommend a strong institutional framework that will strengthen and support the effective policy outcomes.

Unveiling the effect of non-performing loans on lending behaviour: Evidence from Vietnam’s banking system

Huy Nhuong Bui — 2024-11-29

This study shows how non-performing loans (NPLs) and other variables specific to banks affect loan growth and the risk-weighted composition of assets in the Vietnamese banking sector. We use a large panel dataset of Vietnamese commercial banks from 2008 to 2022 and different econometric estimators to look at how NPLs, loan loss provisions (LLPs), and bank-specific factors affect how banks lend money. Additionally, we conduct a sensitivity analysis to bolster the robustness of our empirical findings. Our analysis reveals a statistically significant inverse relationship between NPLs/LLPs and loan growth rates, underscoring the critical role of effective credit risk management. Furthermore, institutional characteristics such as bank size, liquidity position, profitability metrics, and tangible asset ratios substantially influence lending patterns and risk exposure. Conversely, macroeconomic and broader institutional factors demonstrate mixed effects, with many exhibiting statistical insignificance. This study addresses a notable gap in the extant literature concerning the determinants of bank lending behaviour in Vietnam, offering nuanced insights into the role of credit risk indicators and bank-specific attributes. Our findings yield substantial implications for regulatory bodies, policymakers, and banking executives in their pursuit of enhancing the stability and operational efficiency of Vietnam's financial system. By elucidating these relationships, our research contributes to the ongoing discourse on banking sector dynamics in emerging economies. It provides an empirical foundation for informed decision-making in financial policy and risk management strategies.

Sentiments, COVID-19, and the motivations for pro-forma earnings management in South Africa

Joseph Olorunfemi Akande — 2024-12-05

Researchers have identified investor sentiment as influencing corporate decisions. Prior studies focus on its influence on stocks, investment, and corporate financing. This study restricts the sample to the financial-crisis-free periods (2012–2021) and explores how sentiments, pandemics, and other potential firm-level factors motivate earnings management in South Africa. The earnings management is measured based on the Jones model’s (modified Jones) discretionary accruals for the main (robustness) analysis, and the difference in price-earnings ratio index of sentiment was applied. The evidence identifies new insights. It was shown that the expected value of the discretionary accruals is non-drifted. Also, earnings manipulation reduces due to changes in sentiments, but the expected value increases due to the COVID-19 occurrence. In addition, sentiments during the pandemic do not hold predictively and clearly would not incentivise the managers to engage in earnings management. Investors need to consider the impact of the pandemic and sentiments on earnings management when formulating their investment strategies. The findings can potentially guide investors to be cautious and perceptive about financial reports during crises in light of the documented increase in the expected value of discretionary accruals due to COVID-19. The study's original contribution is to establish how sentiments impact the estimates of the pro forma EM, which overstate earnings. It also demonstrates how pandemics affect these estimates, and how sentiments due to COVID-19 influence these estimates using data from South Africa.

Financial conditions index and economic growth: Empirical evidence from Vietnam

Thi Hoang Anh Pham — 2024-12-06

This paper measures and investigates the impact of the financial conditions index (FCI) on Vietnam's economic growth. Using principal component analysis (PCA) and a monthly time series macroeconomics dataset from January 2013 to December 2022, we calculated Vietnam's FCI. Furthermore, this paper employs the autoregressive distributed lag (ARDL) model to assess the influence of the FCI on Vietnam's economic growth, both in the short and long term. Research results indicate that easing financial conditions will promote Vietnam's economic growth in the short term. In addition, factors such as public investment, the labour employment index of industrial enterprises, exports, and the M2 money supply positively influence Vietnam's economic growth. In contrast, imports have a negative impact on Vietnam's economic growth in both the short-term and long-term models. This paper proposes several strategies for policy enforcement agencies to enhance the effectiveness of monetary policy management in Vietnam. These include: (i) encouraging public investment and foreign trade, especially by increasing exports; and (ii) keeping monetary and credit policies flexible and closely watching both domestic and international macroeconomic developments so that they can have ready-made policies for how to respond. Our research findings and recommendations are useful to policymakers and investors.

The digital edge and institutional quality: A pathway to effective public debt management in developing MENA economies

Ola Sidani — 2024-12-06

This research examines the role of digitization in improving the impact of the quality of institutions on public debt. It studies a panel dataset for 12 Middle East and North Africa countries over 20 years. It aims to assess the function of digital governance in enhancing the ability of institutional frameworks to efficiently manage public debt. Specifically, it tests the effect of digitized quality of institutions on public debt by introducing government digitization into a consolidated quality of institutions metric, which is based on the worldwide governance indicators. We construct this metric using Principal Component Analysis, which sharply highlights the critical role of a holistic quality of institutions approach in public debt management. The research suggests utilizing a single-step Generalized Method of Moments estimation model, which is known for its robustness in studying dynamic panel datasets and includes associated diagnostic tests to properly validate estimation results. The findings demonstrate a positive and significant correlation between the digitized quality of institutions and public debt. The research provides a distinct understanding of institutional capacity enhancement for effective public debt management by integrating government digitization into the framework of governance itself. It provides invaluable insights for decision-makers, particularly in developing countries suffering from weak governance structures. By integrating digitization into the governance structures, countries enhance the quality and capacity of their institutions, which proves to be a critical factor in effective public debt management.

Green investment nexus eco-efficiency and firm value: Evidence from top 40 JSE-listed firms

Oloyede Obagbuwa — 2024-12-06

This study aims to investigate the connection between green investment, eco-efficiency, and firm value amidst increased global emphasis on environmental sustainability. The study used a generalised method of moments (GMM) to analyse a panel of the top 40 listed companies on the Johannesburg Stock Exchange (JSE) from 2015 to 2022. The top 40 listed companies represent 80% of the total listed companies on JSE market capitalisation. The findings show that green investment's effect on eco-efficiency and firm value is positive and statistically significant. This indicates that there are plenty of chances for South African businesses, especially the top 40 listed firms, to lead and innovate in the green economy, given the continued emphasis on sustainability and green growth, which will improve reputation and risk management and increase operational efficiency. The overall implication is that, in the long run, these investments will strengthen the financial stability and resilience of businesses, in addition to mitigating environmental effects. A competitive advantage can result from strategically integrating green practices, which promotes regional sustainable development. The paper offers insightful empirical data from the context of emerging markets, notably South Africa. The research on green investment, which primarily focuses on developed economies, frequently underrepresents emerging markets. The study broadens our knowledge of how green investment affects corporate performance and environmental effects in a distinct regulatory and economic context by analysing the JSE.

Influencing digital marketing and marketing performance on the business sustainability of small and medium enterprises

Nguyen Thi Ngoc Nga — 2024-12-06

The motivation and significance of this research are designed to extend the Resource-based view theory to examine factors in the relationship between digital marketing, brand awareness, marketing performance, and the business sustainability of local small and medium enterprises. Ho Chi Minh City, from which the research will propose management implications that can improve the business sustainability of small and medium enterprises (SMEs) in the city. Therefore, the study aims to determine the impact of digital marketing and marketing performance on the business sustainability of SMEs in Ho Chi Minh City in the era of a digitized economy; understanding how digital marketing strategies influence business sustainability is increasingly crucial. Small and Medium Enterprises (SMEs) are a vital component of the economic ecosystem in Vietnam. The authors chose Covariance-Based Structural Equation Modeling (CB-SEM) to analyze data and achieve the proposed research goals. With a sample size of 413 observations, the author used the supportive software SPSS20 and SmartPLS 4 tools to analyze the data. The results indicate that digital marketing positively impacts brand awareness, marketing performance, and business sustainability (BS). The study also highlights the mediating role of brand awareness and marketing performance. New insights into the relationship between digital marketing and business sustainability, brand awareness, and business sustainability have also been identified. The author proposes management implications for SMEs to enhance their competitive advantage and long-term viability in the dynamic business landscape of Ho Chi Minh City.

Determinants of rural-urban differential in asset poverty: Evidence from South Africa

Talent Thebe Zwane — 2024-12-06

Since the advent of democratic governance in 1994, poverty eradication has been a central focus of policy development in South Africa. This objective is in line with the first Sustainable Development Goal, which seeks to eliminate global poverty in all its forms by 2030. This study aims to explore the factors that contribute to asset poverty in South Africa, both urban and rural, an issue that data constraints have largely overlooked. This work utilises principal component analysis to calculate weights and appropriate panel data models to identify essential drivers of asset poverty within distinct geographical areas in South Africa. The findings from the random effect probit model revealed that variables such as land ownership, age of the head of the household, being married, and educational status have a significant mitigating impact on asset poverty. However, the factors contributing to rural asset poverty differ somewhat from those contributing to urban asset poverty. For instance, land ownership appears to be a key factor in explaining poverty in rural areas, relative to their urban areas. Additionally, we found that being married and having all levels of education are key predictors of the rural sample based on the magnitudes of the impact. These findings imply that land remains a fundamental component of different livelihoods for rural dwellers and might encourage rural, emerging agriculturalists to participate in large-scale farming. Thus, the government should continue to redistribute land and further assist rural emerging agriculturalists who want to be involved in large-scale farming.