Faculty of Commerce, Law and Management (ETDs)

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Subject: search.filters.subject.Liquidity

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    Credit growth and its impact on profitability and liquidity in the local Banking Industry of South Africa and the United Kingdom
    (University of the Witwatersrand, Johannesburg, 2022) Pillay, Melissa Dianne; Van Wyk, Liandi; Gomez , Samantha
    The study aims to review the impact of credit growth on local bank profitability and liquidity in both South Africa (SA) and the United Kingdom (UK) between 2015 and 2020. A quantitative approach is used in the study, using descriptive statistics and panel regression analysis. The sample data were extracted from The Banker database; this is a key source of data and analysis for the world’s banking sector, South African Reserve Bank (SARB), Statistics SA, and Trading Economics. Explanatory variables for profitability in the panel regression analysis include return on average assets (ROAA), return on average equity (ROAE), total assets, equity assets, loan assets, cost- to-income, Gross Domestic Product (GDP) growth rate, Herfindahl-Hirschman Index (HHI), consumer price index (CPI), the interest rate on loans, interest rate margin (IRM), unemployment rates, and credit growth. Explanatory variables for liquidity in the panel regression include ROAE, total assets, equity assets, GDP growth rate, CPI, interest rate on loans (IRL), IRM, unemployment, and credit growth. The findings indicate that credit growth is insignificant for bank profitability and liquidity in SA and the UK, so no relationship exists. The main issue is not credit growth per se but the combination of high credit growth, low provisioning, and looser lending. Based on the findings, a negative relationship exists between cost-to-income and bank profitability, reflecting that a higher cost-to-income ratio does decrease bank profitability in both SA and the UK. Other variables for SA were statistically significant: equity assets, total assets, the cost-to-income ratio, and GDP growth rate. In the UK, the following other variables were statistically significant: loan assets, total assets, cost-to-income, GDP growth rate, HHI, ROAE, CPI, and IRM. Further research can focus on expanding the period and the countries reviewed to assess credit growth in more depth.
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    Cost and aconomic growth in Eswatini
    (University of the Witswatersrand, Johannesburg, 2024) Shongwe, Mbongeni Welcome; Kodongo, Otongo
    The sluggish economy and low GDP growth in Eswatini have sparked concerns regarding the efficient allocation of high liquidity towards productive sectors. There is a pressing need to determine if the high cost of credit plays a role in exacerbating this issue. Despite the availability of ample liquidity, it remains unclear if it is effectively channeled into sectors that can fuel economic growth. Therefore, it is intriguing to investigate whether the high cost of credit is a contributing factor to this problem. This study examined the relationship between the cost of credit and economic growth in Eswatini, as well as the impact of banking sector liquidity on cost of credit and the role of excess liquidity in promoting economic growth. The study used the Autoregressive Distributed Lag model (ARDL) to analyse time series data from 1975 to 2021, the study found that factors such as domestic credit, GDP growth, liquid assets to liabilities, and trade significantly influence cost of credit in the short run. In the long run, variables like budget deficit, domestic credit, exchange rate, GDP growth, liquid assets to liabilities, and trade continue to significantly impact cost of credit. The study recommends that policymakers should increase credit availability, diversify credit risk and increase liquid assets relative to liabilities to lower cost of credit. Additionally, promoting financial inclusion and access to credit for SMEs can further stimulate economic growth. A thoughtful and measured approach by policymakers is crucial for creating a stable financial system that supports economic economic growth.
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    Bond market size, liquidity and bond yields in Africa
    (2021) Magoro, Tebogo
    This study investigates the relationship between the size and liquidity of African bond markets to the cost of debt capital in the form of bond yields. While recognizing studies such as Houweling, Mentink, and Vorst (2005) that indicate the size of bond issuance affects the liquidity of bonds in the markets, this study also tests for any connection between size and liquidity for the African region. The empirical analyses were conducted in various African markets that include; Botswana, Egypt, Ghana, Kenya, Mauritius, Namibia, South Africa, Nigeria, Morocco, and Zambia, for a period ranging from 2009 and 2019, using both panel regression with fixed effects and a factor model of sorted portfolios. Although the results of the analysis were mixed across different countries, there is evidence of a negative relationship between liquidity and yields as well as a positive relationship between size and yields. However, we recognize that the results also indicate that size is closely and positively related to liquidity in most of the African countries under study. More research can be done to identify and test other factors that affect bond market liquidity, and how they impact yields to give strength to this research’s finding