Evidence on growth and financial development using principal components

Saci, Karima; Holden, K.

doi:10.1080/09603100701720286

Cited by 43 publications

(26 citation statements)

References 19 publications

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“…Savings are transferred into investments through the process of information evaluation and identification of profitable investments (Beck & Levin, 2004;Saci & Holden, 2008). Higher levels of the ratio suggest that transaction costs are low and an increased level of financial intermediation (Saci& Holden, 2008). The increase in the ratio over the period of this study suggests that South African banking sector has been able to reduce transaction costs and improve the financial intermediation role played by the banks.…”

Section: Overview Of Banking Sector Development In South Africamentioning

confidence: 83%

“…The ratio of broad money to GDP is an indicator of the size of the banking sector in relation to the economy as a whole and shows the level of liquidity provided by the banking sector. Unlike the domestic credit to the private sector, it does not show how savings are allocated to investments and does not exclude private sector credits (Saci & Holden, 2008). Domestic credit to private sector ratio indicates the role of banks in providing long term financing to the private sector and the extent to which savings are transferred into investments.…”

Section: Overview Of Banking Sector Development In South Africamentioning

confidence: 99%

“…Domestic credit to private sector ratio indicates the role of banks in providing long term financing to the private sector and the extent to which savings are transferred into investments. Savings are transferred into investments through the process of information evaluation and identification of profitable investments (Beck & Levin, 2004;Saci & Holden, 2008). Higher levels of the ratio suggest that transaction costs are low and an increased level of financial intermediation (Saci& Holden, 2008).…”

Section: Overview Of Banking Sector Development In South Africamentioning

confidence: 99%

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Banking Sector Development and Corporate Leverage: Empirical Evidence from South African Firms

Etudaiye-Muhtar

Ahmad²

2014

IJEF

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The banking sector in Africa dominates the financial system which makes bank credit an important source of external finance for firms within the economy. For this reason, financial policy makers and regulators implement development measures in the banking sector to ease a firm's access to bank credit. This paper investigates the effect of banking sector development on capital structure decisions of publicly listed firms in South Africa with the use of a dynamic panel data estimator. We use the two-step system generalised method of moments (GMM) in the investigation and find that as the banking sector develops, publicly listed firms in South Africa use less debt in their capital structure. This is consistent with the notion that as the banking sector develops in emerging markets; the resultant risk management process which tightens lending process gives a better pricing for risk and makes the cost of bank credit higher. The policy implication for financial policy makers and regulatory bodies is that they should implement policies that will put in place an efficient risk management process which at the same time, reduces cost of bank credit.

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Section: Overview Of Banking Sector Development In South Africamentioning

confidence: 83%

Section: Overview Of Banking Sector Development In South Africamentioning

confidence: 99%

Section: Overview Of Banking Sector Development In South Africamentioning

confidence: 99%

See 1 more Smart Citation

Banking Sector Development and Corporate Leverage: Empirical Evidence from South African Firms

Etudaiye-Muhtar

Ahmad²

2014

IJEF

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“…PCA has been applied to analyse financial development by e.g. Saci and Holden [2008]. FA and PCA have been used, for instance, by Klomp and de Haan [2012] to analyse the bank risk and regulations.…”

Section: Methodology and Datamentioning

confidence: 99%

Development of Financial Systems in 1995–2014: A Factor Analysis

Iwanicz-Drozdowska

Smaga

2017

Contemporary Trends and Challenges in Finance

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Summary:The aim of the research was to analyse financial system development patterns for both 19 post-communist European economies and 21 non-post-communist (advanced) countries over the 1995-2014 period. The use of a factor analysis allowed for identifying two unobservable factors which account for most of the variance of the 9 observed variables characteristic of the economic and financial development, the banking sector's standing and the structure of the financial sector. Identified factors represent the financial system development and growth of the banking sector, but their roles differ among the analysed groups of countries. The banking sector is a significant driving force of development in both cases. Yet, in advanced economies, a certain role is also played by the stock market, which is not the case for post-communist countries. The results show that there is higher homogeneity in the financial system development patterns in post-communist countries, while the roles of both factors are more heterogeneous among advanced economies. Lastly, the results provide evidence that the global financial crisis did not cause a permanent structural change in these two processes.Keywords: post-communist countries, financial system, factor analysis. We are grateful to dr Marek Karwański for helpful discussions and valuable comments to the earlier version of the paper. All remaining errors are our own. The earlier version of the paper was published as . 48Małgorzata Iwanicz-Drozdowska, Paweł Smaga Streszczenie: Celem badania była analiza rozwoju systemów finansowych 19 europejskich krajów postkomunistycznych i 21 krajów wysokorozwiniętych w okresie 1995-2014. Zastosowanie analizy czynnikowej pozwoliło na zidentyfikowanie dwóch nieobserwowalnych czynników, które odpowiadają za większość wariancji 9 zmiennych charakterystycznych dla rozwoju gospodarki, systemu finansowego oraz kondycji sektora bankowego i struktury systemu finansowego. Pierwszy czynnik obejmuje ogólny rozwój systemu finansowego, a drugi rolę sektora bankowego. Rola poszczególnych czynników jest zróżnicowana w badanych grupach krajów. O ile sektor bankowy jest znaczącą siłą napędową rozwoju w obu grupach, to w krajach wysokorozwiniętych istotną rolę odgrywa także rozwój rynku giełdowego, co z kolei nie jest obserwowalne w krajach postkomunistycznych. Wyniki wskazują na istnienie większej jednorodności w kierunkach rozwoju systemów finansowych wśród krajów postkomunistycznych, natomiast rola wspomnianych czynników jest bardziej zróżnicowana w gospodarkach wysokorozwiniętych. Analiza czynnikowa prowadzi także do wniosku, że globalny kryzys finansowy nie spowodował trwałych zmian strukturalnych w obu procesach.Słowa kluczowe: kraje postkomunistyczne, system finansowy, analiza czynnikowa.

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“…Cline (2015) argues that all these results are merely a statistical artifact, and claims that the results are explained by slower growth at higher per capita income levels, but this claim seems to have been answered effectively by Arcand et al(2015b). Adnan (2011), building on the work of Saci and Holden (2008), constructed an index of financial development based on data for the banking and insurance sectors, as well as stock and bond markets. Thirteen variables were used, capturing depth and efficiency, with more in the former category.…”

Section: Financial Integration and Financial Developmentmentioning

confidence: 99%

Heterogeneous Patterns of Financial Development: Implications for Asian Financial Integration

Bun

Singh

2016

International Economic Journal

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This paper analyzes detailed differences in patterns of financial development across the major Asian economies, including three of the region's largest economies (China, Japan and South Korea), to understand how these differences might affect possibilities for greater regional financial integration. In particular, the paper argues that heterogeneous patterns of financial development, and not just differences in levels of financial development, may present an economic challenge to regional financial integration efforts, aside from possible political challenges. The paper provides background on the case for financial openness, Asian experiences with financial integration, and regional economic responses to external shocks. It also discusses policy options, including regulatory reform and coordination, and possible risk management policies and institutions, in the context of heterogeneous patterns of financial development.

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Evidence on growth and financial development using principal components

Cited by 43 publications

References 19 publications

Banking Sector Development and Corporate Leverage: Empirical Evidence from South African Firms

Banking Sector Development and Corporate Leverage: Empirical Evidence from South African Firms

Development of Financial Systems in 1995–2014: A Factor Analysis

Heterogeneous Patterns of Financial Development: Implications for Asian Financial Integration

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