Kalu Ojah

Determinants of corporate debt structure in a privately dominated debt market: a study of the Spanish capital market

To date, corporate debt structure research has focused largely on national debt markets characterized by both public and private debts supplies. However, given that most national debt markets are characterized by the absence of public debt supply, the representative debt market of Spain is used to extend the research on corporate debt structure. A double-hurdle test approach reveals that the likelihood of using bank debt is positively related to firm size and information availability but negatively related to firm credit worthiness, while the likelihood of using non-bank private debt is positively related to firm size, growth potential, relative firm size and degree of leverage. Further, it is found that the amount of bank debt firms hold is positively related to firm size, growth potential, information asymmetry, and age but negatively related to information availability. The amount of non-bank private debt is positively related to firm size but negatively to growth potential and age. Moreover, it is found that though some roles of private debt providers are similar in the two distinct national debt markets, some roles of public debt suppliers are supplanted by non-bank private debt suppliers in a debt market bereft of public debt supply.

Credits and non-interest rate determinants of loan demand: a Spanish case study

This article uses bivariate probit analysis to model the potential relationship between the condition of being credit-unconstrained and holding loans as well as to ascertain determinants of a household being credit-unconstrained and likely holding consumer and real-estate loans. It documents that family size, education, permanent and transitory incomes, among others, affect Spanish households’ desire and capacity to hold loans. Furthermore, these factors were found to affect demands for real-estate and consumer loans differently. In general, the above and other results from this research provide insights that would interest credit consumers, credit suppliers, and policy makers in Spain.

Conditional Pricing of Currency Risk in Africa's Equity Markets

Article history: Received 3 July 2014 Accepted 12 August 2014 Available online 19 August 2014 In this paper, we sought to establishwhether Africas volatile currencies drive equity risk premia.We use the SDF framework to estimate various conditional specifications of the International Capital Asset Pricing Model through generalized method of moments technique. Our results show strong evidence of conditional, time-varying currency risk premia in equity returns. Currency risk is also perceivedby international investors as important in informing the equities pricing kernel. Interestingly, we find evidence that international investors are concerned about Africas small size equity markets and build the impact of anticipated low trading into their pricing calculus.

Strategic Competition, Valuation, Costs and Growth Potential: The Example of Global Product Design and Development

We study the performance attributes of an international production form that is designed for success in an increasingly global marketplace‐global product design and development. We find that firms elicit higher returns from their global product development when they compete in strategic complements than when they compete in strategic substitutes. These firms are most likely to compete in strategic complements if they have higher free cash flows, but are most likely to compete in strategic substitutes if they are more dominant in their industry. Importantly, global product development reduces cost largely via variable cost reduction. Moreover, we find that global product development contributes to the firm’s growth potential when pursued in conjunction with high multinationalism, aggressive competitive strategy, and high cost saving.

Cross-Border Capital Flows and Economic Performance in Africa: A Sectoral Analysis

We argue that cross-border capital flows can provide relief for African countries’ pervasive and extraordinarily high financial constraint, if properly harnessed by matching differential flows—foreign direct investment, foreign portfolio investment and remittances—with the production sectors that they are most suited for. Guided by the economics that underpin this productive matching, we used difference GMM to estimate the postulated relationship between cross-border capital flows and sectoral value-added growths. We find that, indeed, certain flows aid growth in some sectors while retarding or not affecting growth in other sectors. Therefore, African countries can use cross-border capital flows strategically to relieve their financial constraint and, consequently, enable economic growth and development.

The Macroeconomic Determinants of Banking Efficiency: An Empirical Analysis of South Africa Against the Rest of the World

The efficiency of a nation’s banking industry is a critical factor in the quest to realize economic growth and prosperity for its citizens. This study identifies a host of macroeconomic factors which have been shown to have a strong causal link with the efficient operation of a given banking industry. The efficiency of the South African banking industry is found to be lagging behind most of the twenty representative countries, notwithstanding the way one classifies efficiency. Only among some nations from the South American and Eastern European regions is South Africa’s banking industry efficiency profile comparable.The increase in the size of skilled and available work force, the growth in the size of real spendable per capita GDP, the wide availability of technology and computers, all positively increase the efficient operation of a banking industry. The erosion of an economy’s currency has a negative effect on efficiency but this is not found to be significant across all efficiency measures. The findings point to significant drivers, that if found to be lacking, are likely to indicate a climate of inefficiency. Finally we use Data Envelopment Analysis (DEA) to measure the efficiency of Decision Making Units (DMU’s), in this case, individual banks. However, unlike other studies, we use it as a robustness check of the previous empirical results. These two distinct methods yield near identical results. We conclude that the major causes of inefficiency seem to be structural; the concentrated ownership of the sector, interlocking directorships on bank boards and the oligopolistic nature of the industry mean that South Africa’s customers are paying too high a price for intermediary services.