Wits Business School (ETDs)

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    Effect of Corporate Governance and Institutional Quality on Firm Performance and Economic Growth in Emerging and Developed Markets: A comparative analysis
    (University of the Witwatersrand, Johannesburg, 2024) Natto, Dinah Milembe; Mokoaleli-Mokoteli, Thabang
    Purpose of the study The objective of the current study is to investigate the effects of corporate governance and institutional quality on firm performance and economic growth in emerging and developed markets. These sample countries were selected based on their significant role in their respective economic blocs and based on their unique economic and firm characteristic Research design The impact of corporate governance and institutional quality on firm performance was rigorously evaluated using the Generalized Method of Moments (GMM), while controlling for key variables such as economic growth and other relevant factors. Major findings The study found that corporate governance compliance levels have improved significantly in emerging economies over the study period, with South Africa leading the sample countries. In addition, corporate governance has a significant positive correlation with all firm performance measures in all sample countries. Furthermore, corporate governance has a long-term relationship with ROE and Tobin’s Q in emerging market countries and not in developed countries. However, weak institutions reverse the benefits of a robust corporate governance framework, especially in emerging economies where institutional quality was found to be low. Lastly, the study revealed that over the study period, corporate governance was only found to have a long-term relationship with Tobin’s Qin India. Practical implications Policymakers in emerging and developed markets, the research provides insights into which aspects of corporate governance and institutional quality are most effective in promoting firm performance and economic growth. This can guide the design and implementation of regulations and reforms. Investors can use the findings to assess the risk and potential returns in different markets based on the strength of corporate governance and institutional frameworks. Strong governance and institutions may indicate lower risk and higher stability. Social implication Improved firm performance driven by good governance and strong institutions may lead to better wages and working conditions for employees, reducing income inequality and contributing to social stability. Originality While studies on corporate governance, institutional quality, and their impacts on firm performance and economic growth exist, the originality lies in the comparative analysis between emerging and developed markets. Furthermore, the research integrates the analysis of corporate governance and institutional quality, rather than examining them in isolation.
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    Essays on the proposed monetary integration in the ECOWAS region
    (University of the Witwatersrand, Johannesburg, 2024) Eshun, Richard; Tweneboah, v
    Monetary integration has been projected to increase trade relations among member countries and plays an important role when it comes to economic growth through the elimination of trade barriers, the promotion of free movement of people and goods and the introduction of common external tariff and integration of payment system and capital markets of member countries. Whiles monetary integration in ECOWAS has been given much interest in extant literature; relevant research gaps remain largely in areas such as the introduction of ex-post monetary integration. In specifics, where the salient OCA criteria is used to examine the economic benefits member countries intend to gain with ex-post introduction of the single currency. The thesis contributes to fill this gap by investigating the ex-post introduction of monetary integration in ECOWAS. Knowledge of this is extremely crucial to policymakers to understand whether monetary integration can thus promote intra-regional trade in the ECOWAS region. This thesis comprises of four self–contained empirical essays. Each essay investigates a relevant lacuna in extant literature by relying on several advanced econometric techniques. In the first empirical study, we examined the level of integration of exchange rates between the West African Monetary Zone and the West African Economic and Monetary Union countries using wavelet-based methods. Findings suggest low degrees of integration between the two blocs at higher frequencies, but the level of integration gradually becomes stronger as it navigates from the higher frequency (lower scale) to the lower frequency (higher scale). It implies that ex-ante convergence of exchange rates is difficult, however, in the long-time horizon, exchange rates convergence is possible. Evidence from the cross-correlation analysis depicts lead (lag) effects Essays on the proposed monetary integration in the ECOWAS region 2024 © Richard Eshun Page iii are time-varying and heterogeneous, showing no country’s exchange rates as leader or follower. Different currencies have the potential to lead or lag at varying scales. In the second empirical essay, we investigated whether the impact of stock market development on growth in the ECOWAS region is dependent on the level of institutional quality such as voice and accountability, political stability, rule of law, control of corruption, government effectiveness, and government regulatory control. Our evidence suggests that, when institutional quality index is used as the mediating variable, we are able to establish that stock market development and economic growth nexus is contingent on institutional quality. Thus, the quality of the development of the stock market is important for economic growth, where better institutional quality is potent in ensuring the effectiveness of stock exchanges in promoting growth. The results also demonstrate that low quality of institutions tends to distort the ability of foreign direct investment (FDI) and domestic credit to the private sector which is used in this study to proxy for financial development to have any positive significant effect on growth. When we disaggregated the institutional quality index into its various dimensions whiles we constructed a stock market development index, our evidence suggests that, stock market development has a positive and significant effect on growth when political stability is above the threshold level. We further realized that, when government effectiveness is the threshold variable, stock market development has a positive and significant relationship with growth below the threshold level whiles higher regulatory control has a negative effect on how stock market development influences growth. This indicates that too much government interference inhibit the development of stock market to have a substantial positive influence on growth. This corroborates the financial repression and financial liberalisation theory by McKinnon and Shaw (1973) which is tested in this study objective. We established that, below the threshold level of Essays on the proposed monetary integration in the ECOWAS region 2024 © Richard Eshun Page iv voice and accountability, rule of law, and control of corruption, economic growth is largely insensitive to stock market development. Our main conclusion drawn is that, when there are higher levels of institutional quality, it can promote growth in the ECOWAS region. In the third empirical essay, we departed from the conventional way of studies on the relationship between labor migration and economic growth by examining the nonlinearities in this relationship by using Shin et al. (2014) methodology. What emerged is that the evidence supports the salutary effect of labor migration on economic growth in the ECOWAS sub-region. The baseline Autoregressive Distributed Lag results show that a 1% increase in labor migration reduces GDP by 0.66% which is statistically significant whiles the Non-linear Autoregressive Distributed Lag results show that, an increase in labor migration reduces GDP by 0.16% and a decrease in labor migration, increases GDP by 1.36% albeit insignificant in the long run. The essay evidences asymmetry relationship in the labor migration and economic growth nexus in ECOWAS. A key implication that emanates from this essay is that, policy makers in the ECOWAS sub-region should institute pragmatic measures to reap the full benefits of migration. In the fourth and final essay, the study examined whether there is a homogeneous causal relationship between trade openness and economic growth in the ECOWAS region by employing the Granger causality test by Dumitrescu and Hurlin (2012). As a robustness check, the study used four separate lags to establish this and out of the four lags, three lags show that trade openness homogeneously cause economic growth in the ECOWAS region, however, there is evidence from all the lags that economic growth does not homogenously cause trade openness. The findings reported no bidirectional causality in each of the variables. We further test the resilience of growth on impulses from trade openness; the evidence suggests the effect of transmission of GDP on its own shocks was permanent. In the long term, it will proceed to have Essays on the proposed monetary integration in the ECOWAS region 2024 © Richard Eshun Page v a positive impact on the economy. Evidence from the Impulse Response Function (IRF) result also discovered permanent policy shock of foreign direct investment (FDI) with a positive influence on GDP in the long-term whiles the percentage of variance explained by own shock in the short term accounted for 81.16% and continue a downward trend until it ends with an average around 68.42% at the end of the 10th period. The Pooled Mean Group/autoregressive distributed lag results show that trade openness has a positive and significant effect on economic growth with coefficient of 0.834 (0.0470) with P-value reported in parenthesis which indicates that a 1% increase in trade openness would lead to a 0.83% increase in GDP growth. At the policy front, ECOWAS heads of state should provide more effervescent and effective trade policies that are responsive to changing the trading market landscape in the sub-region while engaging economic agents to improve on trade infrastructure development which has evincing health for trade and economic growth.
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    Evaluating the influence of wool, cotton and fish on economic growth in Lesotho
    (University of the Witwatersrand, Johannesburg, 2021) Mokhothu-Ramohlanka, Thato; Sibanda, Jakubose
    This study aims to evaluate the influence of wool, fish, and cotton on the economic growth in Lesotho, analysing a 30-year period from 1990 to 2020. The paper provides an analysis of the long-term and short-term relationships between wool, cotton, fish and economic growth, and their causal effects on economic growth. The study used the Augmented Dickey-Fuller and the Phillips Perron unit root tests to determine whether the data set is stationary. The Johansen co-integration model identified the existence of long-run relationships. The error correction model and the Granger causality test determined the short run and causal relationships, respectively. Findings indicate that wool and cotton have a positive and significant influence on economic growth. In contrast, fish has a negative influence both in the long and short run. In addition, the study found unidirectional causation between economic growth and wool exports, bidirectional causality between cotton exports and economic growth, and unidirectional causation between economic growth and fish exports. Finally, to improve the benefits of the agricultural sector in Lesotho, there is a need for policy reform around structural changes to diversify exports and exports markets
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    Economic perfomance and state-business relations in post-apartheid South Africa
    (2020-03) Nkgodi, Bruce Molefi
    In this study the main concern is state-business relations in post-apartheid South Africa. Guided by the political theory of corporatism, the study considers the influence of state-business relations on economic performance. The obvious assumption is that sound state-business relations correlate positively with impressive economic performance. Following the demise of the apartheid system of governance in South Africa, a corporatist institution known as the National Economic Development and Labour Council (NEDLAC) was established. Sub-optimal economic performance of post-apartheid South Africa has raised doubts about the efficacy of NEDLAC's role in fostering economic prosperity for the country. It is contended that in many studies a substantive comprehension of what economic performance entails is absent. To overcome the lack of coherence in the conception of economic performance, this study applies economic growth, public debt and unemployment to measure economic performance. The study found that overall, growing public debt, high levels of unemployment and poor economic growth point to unimpressive economic performance associated with state-business relations in post-apartheid South Africa.
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    Oil prices, stock prices and the economy: examining volatility transmission in developing African countries
    (2020) Sibanyoni, Sylvia Lindiwe
    The dependency of stock prices on the oil price volatility has been found to be more prevalent in emerging market net-oil importing countries. Most African countries are net-oil importer and the effect of the oil price volatility has significant impact on their economies. To answer the objectives of this study, this research employs the diagonal BEKK GARCH model, GMM model and the VECM over data from selected African countries from July 2003 – November 2019. The results from the diagonal BEKK Model suggests a co-movement between oil price volatility and stock price volatility does not appear to be directly linked to geography or economic relations between the sample countries due to financial globalization and integration. There is evidence of increased volatility during and after the 2007/08 crisis financial, with volatility more pronounced in the after math of the crisis. In examining the effects of the oil price volatility on the economic growth, the GMM results show that oil price and stock prices volatility have negative impacts on the economic growth. The empirical findings from the VECM suggest that a significant negative long run relationship between oil price volatility and economic growth exists. Furthermore, the results also indicate that oil price volatility is transmitted to the economy through the exchange rates, real interest rates, consumer price indices (rate of inflation) and the volatility of stock market returns. Finally, the pairwise Granger causality test indicate a uni-directional cause and effect that runs from oil price volatility to economic growth through stock price volatility.
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    The key determinants of foreign direct investment in South Africa
    (2021) Rama, Kamil
    This study investigates the determinants of foreign direct investment (FDI) in South Africa using annual data for the period 1994-2018. The importance of FDI inflows to South Africa cannot be underestimated, it assists in creating value for investible assets and capital formation, but also brings much-needed stimulus to efficiency, productivity and economic growth. Despite being one of the major recipients of FDI in Africa when compared to other emerging countries the value of these inflows can be considered low and volatile. Based off the literature, Pesaran’ s Autoregressive Distributed Lag (ARDL) model was chosen as the method used to test for cointegration. The ARDL model tests the long-run relationship between FDI and its potential determinants and the error correction model (ECM) estimates the short-run dynamic parameters within the ARDL model. The empirical results show that in the long run exchange rate, trade openness and political stability are the most important factors in determining FDI inflows to South Africa. The short-run coefficients show that political stability has a significant positive effect on FDI inflows, while the number of BITS signed has a significant negative effect. The negative short-run coefficients seen with GDP and exchange rate are not notable due to the coefficients being statistically insignificant. The study recommends that he government should look to implement policies which help promote the liberalisation of restrictions around trade and the movement of capital. This should also include looking into increasing the consistency and transparency of fiscal, monetary and trade policies. Exchange rate targeting strategies should be implemented to help stabilize the exchange rate. Lastly the South African government should maintain regulatory policies which promote political stability and invoke investor confidence.
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    Renewable power generation and the environmental Kuznets Curve in South Africa
    (2021) Modise, Motsei
    The Environmental Kuznets Curve (EKC) hypothesis states that there is an inverted U-shape relationship between economic growth and environmental degradation. South Africa is currently in the initial phase of renewed economic growth. Due to its historical reliance on coal for power generation, the country is also among the highest carbon dioxide emitters globally. There is a wide range of existing literature investigating the presence of the EKC in South Africa with other independent explanatory variables such as energy consumption, financial development, and globalisation added to the investigation. However, few studies have included total renewable power generation for South Africa in their assessments. This paper sought to investigate the causal relationship between carbon dioxide emissions, economic growth, and total renewable power generation for South Africa within the EKC framework. Time series data for the period 1997-2018, collected from secondary public sources, was analysed for this study. From the regression model, it was deduced that there is no presence of the EKC theory for the period under study. A unit root test was performed using the Augmented Dickey Fuller test, and it was found that all variables were integrated at the order of 1, GDP was also found to be stationary at level. The results from the Autoregressive Distributed Lag (ARDL) approach proved that there is co-integration between carbon dioxide emissions, economic growth, and total renewable power generation. The Granger Causality test showed a unidirectional relationship from carbon dioxide emissions, no causal relationship from economic growth to total renewable power generation and total renewable power generation and CO2 emissions. The results indicated that total renewable power generation had a low significant direct impact on carbon dioxide emissions reduction. The current low proportion of renewable energy sources in the total energy mix led to the finding that there was no meaningful reduction in carbon dioxide emissions. This paper proposed the implementation of efficient and powerful policies geared towards reducing South Africa’s carbon footprint without causing a negative impact on economic growth in the process
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    The key determinants of foreign direct investment in South Africa
    (2021) Rama, Kamil
    This study investigates the determinants of foreign direct investment (FDI) in South Africa using annual data for the period 1994-2018. The importance of FDI inflows to South Africa cannot be underestimated, it assists in creating value for investible assets and capital formation, but also brings much-needed stimulus to efficiency, productivity and economic growth. Despite being one of the major recipients of FDI in Africa when compared to other emerging countries the value of these inflows can be considered low and volatile. Based off the literature, Pesaran’ s Autoregressive Distributed Lag (ARDL) model was chosen as the method used to test for cointegration. The ARDL model tests the long-run relationship between FDI and its potential determinants and the error correction model (ECM) estimates the short-run dynamic parameters within the ARDL model. The empirical results show that in the long run exchange rate, trade openness and political stability are the most important factors in determining FDI inflows to South Africa. The short-run coefficients show that political stability has a significant positive effect on FDI inflows, while the number of BITS signed has a significant negative effect. The negative short-run coefficients seen with GDP and exchange rate are not notable due to the coefficients being statistically insignificant. The study recommends that he government should look to implement policies which help promote the liberalisation of restrictions around trade and the movement of capital. This should also include looking into increasing the consistency and transparency of fiscal, monetary and trade policies. Exchange rate targeting strategies should be implemented to help stabilize the exchange rate. Lastly the South African government should maintain regulatory policies which promote political stability and invoke investor confidence
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    Corporate entrepreneurship and innovation performance: the moderating role of endogenous risk management in the South African telecommunications sector
    (2021) Zondo, Hlengiwe Londiwe
    Innovation and risk are indivisible. The mismanagement of risk can carry an enormous penalty. In recent history, the corporate community has observed a number of risk calamities that have resulted in substantial loss. Harmoniously, mounting evidence advocates for effective risk management as an archetypal characteristic of successful firms. At an academic level, literature discusses the importance of an organisational culture in enterprise risk management as a means of improving firm and innovation performance. However, there is scant empirical evidence to support this connection, an evident research gap within the South African context. At industry level, the South African telecommunications sector has experienced adverse consequences due to the mismanagement of risk that ascended from a lack of control-related structures, policies, systems, and knowledge management systems pertaining to innovation performance. Within this ambit, there lies the need to gain insight on the role of endogenous risk management within the corporate entrepreneurship context and its effect on innovation performance in the aforementioned sector. Consequently, the purpose of this research is to investigate how organisational antecedents of corporate entrepreneurship may influence innovation performance while identifying the potential moderating effect of endogenous risk management on this relationship, within the telecommunications sector in South Africa. This study follows a positivist paradigm, founded on a quantitative research approach utilising a cross-sectional viewpoint. Primary data, with a sample size of 187 participants, was collected by means of an online survey that was self-administered. Two stage probability sampling was adopted for this research. The sampling techniques used were stratified sampling, which was used to sample all the identified telecommunication firms in South Africa with primary focus on the significant market shareholders, and simple random sampling which was applied to employees within the telecommunication firms. Data analysis comprised of correlational analysis, backward elimination method, multiple regression and moderation analysis. The antecedents of corporate entrepreneurship; management support, rewards/reinforcement and time availability were found to be significant predictors of innovation performance at a 99 percent confidence level, whilst organisational boundaries were found to be an insignificant predictor of innovation performance. A significant but indirectly proportional relationship was found between work/discretion/autonomy and innovation performance within this study context. It is noteworthy that the regression analysis revealed time availability, management support and rewards/reinforcement, as the most influential predictors of innovation performance, listed in descending order of strength. Firms with appropriate time availed, rewards/reinforcement and management support for employee entrepreneurial activity, are expected to yield prodigious results in innovation performance. Furthermore, the results indicated that endogenous risk management has a moderating effect on the relationship between corporate entrepreneurship and innovation performance. However, this was discovered to be statistically insignificant for each dimension of corporate entrepreneurship in relation to innovation performance. The findings were precisely the reverse of those found in developed economy context research. The findings of this study have substantial implications for industry, academia and policy makers alike. This study succours telecommunication firms in the establishment and maintenance of internal corporate environments that are conducive to innovation. For longevity and competitive advantage purposes, it is within firms’ best interest to invest in human capital as primary agents of knowledge creation, corporate entrepreneurship and innovation activities. Strategic policy formulation targeted at enhancing innovation outcomes and all the opportunities that come with it – could benefit the country at a micro, meso and macro level. The originality of the study lies its nature within this particular emerging market context and the theoretical contribution made through a construct proposed for inclusion in the antecedents of corporate entrepreneurship framework