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- ItemShareholder value orientation, corporate cash piles and the myth of financial accumulation(Southern Centre for Inequality Studies, 2023-03-06) Niall ReddyFinancialisation scholars argue that the growing financial balance sheets of non-financial corporations indicate a “financial turn in accumulation” driven by the rise of shareholder value orientation (SVO). In this paper I test whether greater shareholder influence or shareholder-aligning managerial incentives can explain the more rapid accumulation of financial assets among non-financial corporations (NFCs) in the United States of America (USA). I find that shareholder power is associated with some increase in shortterm financial assets – but only in the case of certain shareholder types, in particular, high-turnover institutional investors. The magnitudes of the effect are small, however, and only pertain to smaller firms. Moreover, ownership concentration by these impatient investor types is declining. The results suggest that changing corporate governance patterns have little capacity to explain balance sheet financialisation. I argue that mainstream accounts focused on the precautionary savings of new research-intensive firms and tax arbitrage among multinationals offer a better explanation for growing financial balances than the financial accumulation hypothesis. Neither of these implies a substitution of financial for real investment, which calls into question an important mechanism thought to connect financialisation to secular stagnation and rising inequality
- ItemEnabling inclusive economic ecosystems in Africa: A role for city governments?(Southern Centre for Inequality Studies, 2022-12) Joseph, Stacey-Leigh; Karuri-Sebina, GeciThis paper finds that the local state, and in particular major African cities, have a critical ecosystem role in advancing inclusive economic development and mitigating inequality. It reaches this conclusion by investigating: • What potential exists for African cities to design and implement inclusive local economic development approaches; and • How local actors (local government/municipal, civic, commercial and knowledge actors) can play an active role in positively influencing production and socio-economic equality, including through their leveraging of new technologies.
- ItemRisk-based pricing of financial products(2022) Mukatuni, Awelani LynnThis is an analytical research that aims to contribute to the discussions around risk-based pricing of financial products. It aims at contributing a better understanding of the risk-based pricing model, its pros and cons, and areas of improvement in the consumer credit environment. The study uses real-life data and the risk-based pricing model to analyse suitable credit prices that would allow more people to afford taking up credit. The study uses the relationship between price sensitivity and the offered interest rate to support offered credit prices. The study also aims to analyse the national credit act regulations on the maximum interest rate that an institution can offer. The study includes sample calculations that were drawn from Standard and Captec banks under the assumption that the two banks are using the risk-based pricing model. The results revealed that the model allows for more borrowers to have access to credit by allowing lenders to charge a high interest rate to high-risk borrowers. The model rewards low risk borrowers and compensates lenders for extending credit to high-risk borrowers. An analysis of the National Credit Act (NCA) revealed that it allows for banks and borrowers to maximise profit and marginalise a great number of borrowers at the same time. Due to its simplicity, the NCA becomes a good model to use as a basis for offering interest rates for high-risk borrowers, thus increasing the number of borrower classes.
- ItemTowards a Tracking System to Enforce Competition Law in the southern and east African Region(Southern Centre for Inequality Studies, 2022-11) Manjengwa, Earnest; Padayachie, Karissa Moothoo; Nsomba, Grace; Tshabalala, Ntombifuthi; Vilakazi, ThandoThe paper explores the role of market power in exacerbating inequality by looking at the effects of competition on income and wealth distribution. It argues that the conceptual framework, proposed in the paper, can be used to better understand market power and inequality in various African countries in order to develop appropriate responses.
- ItemCharacterising the Relationship Between Market Power and Inequality in Southern and East Africa. Why It Matters?(Southern Centre for Inequality Studies, 2022) Padayachie, Karissa Moothoo; Vilakazi, ThandoThis working paper focuses on competition in the southern and east Africa region where there is a range of large firms with significant market power operating across political borders. It is against this background that it is important to understand the link between market power and inequality (Kaira, 2017; Nsomba et al., 2022). This paper provides preliminary reflections on what we know about that relationship, and details reasons why we need to understand it.