The challenge of rural financial inclusion – evidence from microfinance

Financial inclusion is said to foster development and growth. However, progress in financial inclusion has been slow in rural areas where poverty is most pronounced. This is often attributed to higher transaction costs, higher risks and a more unfavourable contracting environment which makes it more difficult for financial institutions to achieve and maintain sustainability in rural compared to urban areas. Based on data covering 772 microfinance institutions (MFIs) over the period 2008–2013, we test whether rural financial inclusion, notably lending to rural borrowers, is hampered by stronger sustainability challenges than inclusion in urban markets. Our results suggest that a higher share of rural borrowers has no direct effect on MFI sustainability. However, we find that MFIs with a higher share of rural borrowers are less able to exploit economies of scale and productivity effects. Thus, our results provide support for the view that sustainability challenges make it more difficult to achieve progress in financial inclusion in rural than in urban areas.     

The impact of health insurance on households’ financial choices: Evidence from Vietnam

This paper investigates the impact of health insurance on families' financial service choices in Vietnam using TVSEP data from three waves in 2013, 2016, and 2017. The endogeneity is handled via a recursive multivariate probit model. The findings indicate that while health insurance has no effect on private health insurance, it has a positive effect on savings and investments and a negative effect on credit choice. The multivariate probit model's results are robust to both the instrumental variable two-stage least squares model and the bivariate probit model. In addition, correlations between error components in financial service choice equations indicate a possible pattern of household financial usage. The results suggest that health insurance improves households' financial well-being. The implication of the findings is that when developing social security policies aimed at achieving universal health insurance, the influence of health insurance on household finances should not be underestimated.     

Do microfinance institutions benefit from integrating financial and nonfinancial services?

This article examines the impact of microfinance ‘plus’ (i.e. coordinated combination of financial and nonfinancial services) on the performance of microfinance institutions (MFIs). Using a global data set of MFIs in 77 countries, we find that the provision of nonfinancial services does not harm nor improve MFIs’ financial sustainability and efficiency. The results however suggest that the provision of social services is associated with improved loan quality and greater depth of outreach.     

What matters when? The impact of ECB communication on financial market expectations

This article analyses financial markets’ reaction to European Central Bank's (ECB) communication. We apply a novel indicator that quantifies the contents of the ECB's introductory statements and allows disentangling ECB statements on prices, the real and the monetary sector. We provide evidence that it matters what issue the ECB is speaking about: especially, the ECB's statements on price developments represent important news to financial markets. It also matters when the ECB affects markets: communication drives maturities above 4 months.     

The impact of skilled immigrants on their local teammates’ performance

We use the Bosman ruling, which invalidated restrictions on the maximum number of foreign players allowed on professional football teams, to identify a causal positive impact of foreign players in German Bundesliga clubs on the individual performance of their domestic teammates.     

Does the impact of financial liberalization on income inequality depend on financial development? Some new evidence

Instead of empirically finding that higher levels of financial development reduce the positive impact of financial liberalization on inequality, as others do, we come up with the opposite result: financial development strengthens the inequality-raising impact of financial liberalization. We suggest that by, e.g., allowing financial liberalization to lead to more volatility and uncertainty, the model of Bumann and Lensink (2016 “Capital Account Liberalization and Income Inequality.“ Journal of International Money and Finance 61: 143–162.) can be extended as such that also an amplifying instead of reducing effect of financial depth on the impact of financial liberalization on income inequality can be theoretically justified.     

The impact of coal price fluctuations on China’s economic output

Due to the important role of coal in China’s macroeconomic growth, the price of coal significantly influences its economic output. Employing a VAR model, a cointegration test and a state-space model of time-varying variables, this article analyses the influence of coal price fluctuations on the volume and structure of China’s economic output, including both the strength and the time delay of such influence. This article further explores the corresponding relationships between coal price fluctuations and variations in the effects of these fluctuations to analyse the asymmetric influence of coal price fluctuations on China’s macroeconomy. Coal price fluctuations exerted significant long-term positive effects and short-term negative effects on China’s output variables, with an average delay of 11 months; they had positive effects on investment and consumption over the long term and an increasingly negative effect on imports and exports. The average delays were 9 months for investment, 6.5 months for consumption and 10 months for imports and exports. There was an asymmetric correlation between coal price fluctuations and the time-varying elasticity of their impact on GDP. The results in this study are consistent with the actual operating circumstances of the Chinese economy.     

The effect of communication and energy services reform on manufacturing firms’ innovation

Upstream services liberalization improves the efficiency and cost of communication and energy services, reducing the marginal costs of downstream manufacturing firms through input-output linkages. This study explores one possible mechanism behind this finding: innovation. I investigate the effects of communication and energy services reform in India in the mid-1990s on downstream manufacturing firms’ decisions to invest in R&D. The empirical analysis uses manufacturing-firm level data and regulation indicators in the communications and energy service sectors. The liberalization of services in India had a positive effect on manufacturing-firm innovation. These results are concentrated on firms in the middle of the initial productivity distribution. The main channel is the elimination of entry barriers into the communication sector.     

The impact of mechanized processing of cassava on farmers’ production efficiency in Uganda

The study investigates the impact of adopting mechanized processing of cassava on farmers’ production efficiency in Uganda. A stochastic production function, using translog functional form, was used to compare efficiency measures of farmers in mechanized cassava-processing villages compared with the farmers in nonmechanized cassava-processing villages in 2014. Given the specification of the translog production function, the mean technical efficiencies of the farmers were 0.69 and 0.52 in mechanized and nonmechanized villages, respectively. The significant determinants of technical inefficiency among the respondents are farming experience, education, membership of farmer association, access to markets, sale of cassava to processors and farmers who planted cassava as sole crop are all negative, which confirm to a priori expectations and significant at different levels. The policy implication of the study is that mechanization of cassava processing, particularly if done at the right scale, could create demand that can transform primary production for increased yields, higher incomes and production efficiency of smallholder farmers who constitute a significant proportion of Uganda’s agricultural sector.     

Financial constraints on sport organizations’ cost efficiency: the impact of financial fair play on Italian soccer clubs

We analyze the effect of the introduction of stricter financial constraints on the trade-off between sporting and economic results. We apply a stochastic Cobb-Douglas production frontier model to a sample of Italian Serie A teams, i.e. first division, over the period 2005–2015 to evaluate the variation in soccer clubs’ cost efficiency following the application of the UEFA Financial Fair Play (FFP) principles in 2010. FFP imposes stricter financial regulation as a requirement for a club to be admitted to Union of European Football Associations (UEFA) tournaments. Firstly, we find that FFP does not improve the average efficiency of the Italian first division teams. Secondly, we show that FFP has contributed to leveling the playing field, reducing the gap in terms of efficiency between top teams and lower-tier teams.

Abbreviations: FFP: Financial Fair Play; UEFA: Union of European Football Associations; DEA: Data Envelopment Analysis; SFA: Stochastic Frontier Analysis     

The impact of local financial development on firm growth in Vietnam: Does the level of corruption matter?

We examine the effects of province-level financial development and corruption on the performance of Vietnamese firms in terms of the growth rates of sales, investment and sales per worker. Employing a large firm-level dataset of more than 40,000 firms for the period 2009–2013 and applying a heteroskedasticity-based identification strategy, we find that province-level financial development promotes firm growth, while corruption hinders it. Most importantly, the marginal effect of financial development on firm growth depends negatively on the level of corruption. Moreover, financial development exacerbates the growth-retarding effect of corruption.     

Effect of board gender diversity on the financial performance of microfinance institutions: Does judicial efficiency matter?

The impact of board gender diversity on the financial performance of firms is not known. This is because empirical investigations have yielded inconclusive outcomes. This study engages data from 408 microfinance institutions (MFIs) covering the period 2010–2018 from the six microfinance regions to investigate this impact using the Least Squares Dummy Variable (LSDV) and the System Generalized Method of Moments (SYS-GMM) estimation techniques. The study also explores whether judicial efficiency exerts any significant effect on the board gender diversity–financial performance nexus. The study observes that board gender diversity exhibits a strong negative effect on the financial performance of MFIs. The study also observes that the effect of board gender diversity on the financial performance of MFIs escalates in the presence of judicial inefficiency. The study, therefore, unveils the judicial system as a channel through which gender diversity drives the financial performance of MFIs negatively.     

The impact of monetary policy on financial markets in small open economies: More or less effective during the global financial crisis?

This paper estimates the impact of monetary policy on exchange rates and stock prices of eight small open economies: Australia, Canada, the Republic of Korea, New Zealand, the United Kingdom, Indonesia, Malaysia, and Thailand. On average across these countries in the full sample, a one percentage point surprise rise in official interest rates leads to a 1% appreciation of the exchange rate and a 0.5–1% fall in stock prices, with somewhat stronger effects in OECD countries than non-OECD countries (though differences are sometimes not significant). We find little robust evidence of a change in the effect of monetary policy surprises during the recent financial crisis.     

The impact of rustication on sent-down cohorts�� income

We estimate the impact of rustication on sent-down cohorts during the decade period of the Cultural Revolution, relying on econometric methods and policy reviewing. The data used from the Chinese Household Income Project (CHIP) for the years 1995 and 2002 show that the average income of sent-down cohorts is higher than those who were not sent-down, which seems to conflict with the human capital theory that predicts that education increases future expected returns. This paper separates the impact of ability, family background, and policies on intellectual youth and finds that their rustication had a significant negative effect for the sent-down cohorts. Correction for sent-down cohorts’ working experience from the year they went to the countryside decreases the income inequality among low-income sent-down cohorts, and compensates for the negative effects of the sent-down experience.     

The potential impact of China–US BIT on China’s manufacturing sectors

This article finds that the overall effect of the foreign direct investment (FDI) and thereby the China–US bilateral investment treaties (BIT) on Chinese manufacturing sector is positive, which raises the productivity and profitability of the firms, using various econometric models and other evidence. The manufacturing sector as a whole has already opened up to the world economy and needs to continue this process. The industries in the manufacturing sector do not need to be protected, except for in limited fields related to national security, scarce natural resources and well-defined strategic sectors. Gradual lifting of the protection may be needed in the short-run for a small number of vulnerable sectors. A moderate relaxing of the current restrictions will increase FDI in manufacturing from all countries by 4–8% under different assumptions. This effect will be small when only considering FDI from the USA. Domestic firms need to update their technology, reduce costs and learn management skills from their foreign competitors, while using the national treatment terms in BIT to enter the fields that are not open to domestic firms under current regulations. Domestic firms also need to set up firm-level global strategies and reallocate firms’ resources according to the changing investment environment, taking advantage of profit opportunities outside the domestic markets.     

How does financial development influence the impact of remittances on growth volatility?

This paper empirically examines how financial development influences the impact of remittances on GDP growth volatility. This empirical study is conducted using the panel smooth transition regression (PSTR) approach. The results show that the impact of remittances on GDP growth volatility is nonlinear and changes over time and across countries in function of financial development. More precisely, a high level of financial development helps remittances to have a high stabilizing impact. Therefore, public authorities in remittance recipient countries might implement policies that promote the financial sector in order to allow a high stabilizing impact of remittances.     

Some preliminary evidence of the impact of the 2008–2009 financial crisis on women

Beginning in late 2007 and into 2008, a financial crisis originating in the United States spread throughout the world. This article seeks to present preliminary evidence of the impact of this crisis on female labour force participation and the proportion of females working in nonagricultural sectors. A panel data set involving 171 countries is utilized, and the results indicate that the financial crisis led to increases in female labour force participation as well as the proportion of females working in the nonagricultural sector. There are differences in impact for countries of various income levels (low, middle and high). In addition, female political power has also led to increases in the economic participation of females.     

Assessing impact of regulatory risk on shareholders’ wealth

Research indicates that regulatory risk increases required return on investment by investors and causes underinvestment in industries with high sunk costs. The effects of regulatory changes may be measured by estimating the abnormal returns associated with the event. The results may suggest to regulators what should be encouraged or avoided. This article utilizes a fixed effects regression to examine abnormal returns from changes in Philippine nationalization regulations. The results are consistent with extant literature. Supreme Court decisions, which increased uncertainty and regulatory risk, produced negative abnormal returns. The initial release of draft implementing rules did not produce statistically significant effects, but a succeeding draft favouring liberalization, produced positive abnormal returns.     

The impact of OFDI on the performance of Chinese firms along the ‘Belt and Road’

ABSTRACT

Using feasible generalized least squares (FGLS) and ordinary least square (OLS) estimations on a dataset of 1208 outward Foreign Direct Investment (OFDI) events by Chinese-listed firms from 2004 to 2015, this paper investigated the impact of OFDI on the performance of Chinese firms, from which it was found that Chinese firms that had invested in Belt and Road Initiative (BRI) countries were more productive than those that had invested in non-BRI countries. However, OFDI by both state-owned enterprises (SOE) and non-SOE were on average found to be negatively related to productivity and profitability, with state-owned enterprises (SOEs) having worse performance in terms of total factor productivity (TFP) than non-SOEs. A further subsample analysis found that Chinese firms that were investing in developing economies were performing better than those that had invested in developed ones; firms investing in sub-regions like Middle East and South Africa, East Asia and the Pacific, Latin America and the Caribbean experienced a positive post-OFDI TFP but investment in other regions had either insignificant or negatively significant coefficients, indicating that firms in general had poor post-OFDI performances. The findings in this paper are informative for developing going-global strategies for both firms and government authorities.     

The impact of private equity on firms׳ patenting activity

The paper analyses the impact of private equity (PE) backed leveraged buyouts (LBOs) on innovative output (patenting). Using a sample of 407 UK deals we find that LBOs have a positive causal effect on patent stock and quality-adjusted patent stock. Our results imply a 6% increase in quality-adjusted patent stock three years after the deal. The increase in innovative activity is concentrated among private-to-private transactions with a 14% increase in the quality-adjusted patent stock. We also find evidence suggesting that PE firms facilitate the relaxation of financial constraints. In sum, our findings suggest that PE firms do not promote short-term cost-cutting at the expense of entrepreneurial investment opportunities with a long-term pay-off.