Simplice A. Asongu

Government quality determinants of stock market performance in African countries

How do government policies and institutions affect stock market performance? As stock markets grow broader and deeper in African countries, the question becomes more critical. Government quality dynamics of corruption-control, government-effectiveness, political-stability or no violence, voice & accountability, regulation quality and rule of law are instrumented with income-levels, religious-dominations, press-freedom degrees and legal-origins to account for stock market performance dynamics of capitalization, value traded, turnover and number of listed companies. The results demonstrate a significant positive association between stock market performance measures and the quality of government institutions. These findings suggest countries with better developed government institutions would favor stock markets with higher market capitalization, better turnover ratios, higher value in shares traded and greater number of listed companies.

How has Mobile Phone Penetration Stimulated Financial Development in Africa

In the first macroeconomic empirical assessment of the relationship between mobile phones and finance, the author examines the correlations between mobile phone penetration and financial development using two conflicting definitions of the financial system in the financial development literature. With the traditional International Financial Statistics (IFS) (2008) definition, mobile phone penetration has a negative correlation with traditional financial intermediary dynamics of depth, activity, and size. However, when a previously missing informal-financial sector component is integrated into the definition, mobile phone penetration has a positive correlation with informal financial development. Three implications result: There is a growing role of informal finance; mobile phone penetration may not be positively assessed at a macroeconomic level by traditional financial development indicators; and it is a wake-up call for scholarly research on informal financial development indicators that will orient monetary policy.

On the Effect of Foreign Aid on Corruption

The Okada & Samreth (2012, EL) finding that aid deters corruption could have an important influence on policy and academic debates. This paper partially negates their criticism of the mainstream approach to the aid-development nexus. Using updated data (1996-2010) from 52 African countries we provide robust evidence of a positive aid-corruption nexus. Development assistance fuels (mitigates) corruption (the control of corruption) in the African continent. As a policy implication, the Okada & Samreth (2012, EL) finding for developing countries may not be relevant for Africa.

Harmonizing IPRs on Software Piracy: Empirics of Trajectories in Africa

In the current efforts of harmonizing the standards and enforcement of IPRs protection worldwide, this paper explores software piracy trajectories and dynamics in Africa. Using a battery of estimation techniques that ignore as well as integrate short-run disturbances in time-dynamic fashion, we answer the big questions policy makers are most likely to ask before harmonizing IPRs regimes in the battle against software piracy. Three main findings are established. (1) African countries with low software piracy rates are catching-up their counterparts with higher rates; implying despite existing divergent IPRs systems, convergence in piracy rate could be a genuine standard-setting platform. (2) Legal origins do not play a very significant role in the convergence process. (3) A genuine timeframe for standardizing IPRs laws in the fight against piracy is most likely between a horizon of 4 to 8 years. In other words, full (100%) convergence within the specified horizon will mean the enforcements of IPRs regimes without distinction of nationality and locality. Policy implications and caveats are discussed.

Globalization (fighting), corruption and development: How are these phenomena linearly and nonlinearly related in wealth effects?

Purpose - – Is globalization instrumental in fighting corruption? Do wealth effects matter in this fight? Are findings valid when linearity assumptions are dropped? The purpose of this paper is to assess the Lalountas Design/methodology/approach - – Though not form, yet in substance the intuition and motivation are compatible with those of Lalountas Findings - – Social implications - – In countries with high levels of per capita, emphasis is placed on the political and social dimensions of globalization and as a result the effects of this phenomenon on corruption-control are significant. Conversely, in nations with low levels of per capita income, emphasis is given to the economic dimension of international integration and as a result the effect of globalization on corruption is limited. As a policy implication, persistent globalization as an effective means to reduce corruption in developing countries might lead to inappropriate policies in low-income countries. Originality/value - – This paper has tested the Lalountas

Information Sharing and Financial Sector Development in Africa

ABSTRACT This study investigates the effect information sharing has on financial sector development in 53 African countries for the period 2004 to 2011. Information sharing is measured with private credit bureaus and public credit registries. Hitherto unexplored dimensions of financial sector development are employed, namely: financial sector dynamics of formalization, informalization, and non-formalization. The empirical evidence is based on Ordinary Least Squares (OLS) and Generalized Method of Moments (GMM). The following findings are established. Information-sharing bureaus increase (reduce) formal (informal/non-formal) financial sector development. In order to ensure that information-sharing bureaus improve (decrease) formal (informal/non-formal) financial development, public credit registries should have between 45.45 and 50% coverage while private credit bureaus should have at least 26.25% coverage.

Fighting Software Piracy: Which Governance Tools Matter in Africa?

This article integrates previously missing components of government quality into the governance-piracy nexus in exploring governance mechanisms by which global obligations for the treatment of IPRs are effectively transmitted from international to the national level in the battle against piracy. It assesses the best governance tools in the fight against piracy and upholding of Intellectual Property Rights (IPRs). The instrumentality of IPR laws (treaties) in tackling piracy through good governance mechanisms is also examined. Findings demonstrate that: (1) while all governance tools under consideration significantly decrease the incidence of piracy, corruption-control is the most effective weapon; (2) but for voice and accountability, political stability and democracy, IPR laws (treaties) are instrumental in tackling piracy through government quality dynamics of rule of law, regulation quality, government effectiveness, corruption-control, and press freedom. Hence, the need for a policy approach most conducive to expanding development is to implement an integrated system of both IPRs and corollary good governance policies. Moreover, our findings support the relevance of good governance measures in developing countries wishing to complement their emerging IPR regimes.

The Impact of Formal Institutions on Knowledge Economy

Using Kauffman, Kraay, and Mastruzzi governance indicators, this article analyzes the impact of formal institutions on the knowledge economy- by assessing how the enforcement of Intellectual Property Rights (IPRs) through good governance mechanisms affects the knowledge economy. The article also employs the World Bank’s four components of the knowledge economy index characteristic of its knowledge for development (K4D) framework. We estimate panel data models for 22 Middle East & North African and Sub-Sahara African countries over the period 1996-2010. The results show that for this group of countries the enforcement of IPR laws (treaties), although necessary, is not a sufficient condition for a knowledge economy. The results also suggest that other factors are more likely to determine the knowledge economies of these nations. Overall these findings have important implications for both policy and further research.

Law and Finance in Africa

This paper assesses how legal origin influences financial development through regulation quality and the rule of law. It employs all the dimensions identified by the Financial Development and Structure Database of the World Bank. The law channels are instrumented with legal origins to account for financial intermediary dynamics of depth, efficiency, activity and size. The results broadly support the benefits of law mechanisms in financial development. The findings only show partial support for the consensus that English common law countries provide better conditions for financial development. While they dominate in dynamics of depth, activity and size, French civil law countries have an edge in financial allocation efficiency. Portuguese civil law countries broadly fall in-between. With the exception of financial efficiency, French civil law sub-Saharan African (SSA) countries are least while North African countries dominate even English common law countries in financial intermediary aspects of depth and activity. French SSA countries dominate overall in allocation efficiency.

Financial development dynamic thresholds of financial globalization: evidence from Africa

Purpose – The issue of which financial initial conditions are necessary to materialize the benefits of financial globalization remains open to debate in the literature. In this paper, we try to put some empirical structure on the concept of financial threshold conditions in order to give policymakers guidance on the Kose et al. (2011) and Henry (2007) hypothesis. Its object is to assess if financial benefits of financial globalization are questionable until greater domestic financial development has taken place in African countries. Design/methodology/approach – In framing the financial dimension in a more concrete and tractable manner, we examine the concerns of how domestic financial initial dynamics of depth (economic and financial systems), efficiency (banking and financial systems), activity (banking and financial systems) and size, play out in the financial development benefits of financial globalization. The estimation approach consists of assessing the impact of financial globalization through-out the conditional distributions of domestic financial development dynamics. Findings – The introduction of previously missing financial dimensions into the debate generates a number of important findings. Only financial initial (threshold) conditions of size are necessary to materialize the benefits of financial globalization. While financial depth only partially validates the hypothesis, dynamics of efficiency and activity (credit) do not confirm the hypothesis. Practical implications – Addressing the issue of surplus liquidity in African financial institutions could improve the benefits of financial size and potentially reverse the trends of financial efficiency and activity. Depending on the context of sampled countries, the appropriate role of policy has always been either to stem the tide of capital flows or encourage them. Policymakers who have been viewing their challenges exclusively from the latter perspective for benefits in growth (finance) might be getting the financial dynamics badly wrong. Originality/value – Blanket financial development policies may not reap the financial benefits of financial globalization until domestic financial dynamics of depth, efficiency, activity and size are critically considered. The introduction of the last three previously missing components in the literature sheds more light on the globalization-development nexus.