Finance Publications

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Finance Publications

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    Perception of negative earnings persistence and value relevance: Evidence from Zimbabwe
    (2018) Sixpence, A.; Adeyeye, O.P.
    This paper investigates the impact of negative earnings persistence on the value relevance of earnings before interest and taxes (EBIT) and book values for 27 non-financial firms listed on the Zimbabwe Stock Exchange (ZSE). Negative earnings are perceived to be persistent where firms reported losses in at least 25% of the time over the eight-year study period. Two-step System GMM was used, with the average debt-equity ratio and net asset value per share being additional regression instruments. The regressions were primarily done on the ZSE full sample, and then on a profit-reporting firms’ sample. The loss-reporting firms’ sample was too small for meaningful regressions. It was found that when loss-firms were removed from the sample, value relevance of EBIT and book value declined. This means that investors are very meticulous with firms they perceive to be persistent loss-makers but tend to be complacent with profit-firms.
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    Determinants of poverty alleviation: a relative panel data analysis between positive and negative poverty reduction economies
    (2020) Madzimure, T.; Mbedzi, E.
    Determinants of poverty: a relative panel data analysis among African regional economic communities Tariro Madzimure and Edson Mbedzi International Journal of Education Economics and Development, 2021, vol. 12, issue 3, 294-309 The study compares the effects of macroeconomic factors on poverty among African regional economic communities using panel data from 1991 to 2018. A fixed effects model results indicate that from the whole sample, all variables affect poverty. However, individualistic regional economic community characteristics affect poverty differently. The results show that while all factors are important when countries are considered as a single total sample, the effects of particular factors vary from one regional economic community to another signifying the importance of regional economic community characteristics heterogeneity. This implies different policies should be implemented to reduce poverty based on each country's regional belonging. Conclusively, intervening policies implemented to reduce poverty do not yield the same results for countries in different regional economic communities, meaning this classification of countries by regions matters and thus the determinant macroeconomic factors suitable for each region need to be identified first before implementation.
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    Consumer payment choices, costs, and risks: Evidence from Zimbabwe.
    (2021) Simatele, M.; Mbedzi, E.
    Very little is known about payment choices in the African context and in developing countries in general. Their unique infrastructures and economic nuances suggest that both the availability of instruments and supporting structures in the payment system are different from the general perception. This exploratory study investigates the payment choices in Zimbabwe, a country that claims the existence of a near cashless society. Through a descriptive and logit analysis based on survey data, we find that a strong preference for cash, coupled with cash shortages and inadequate infrastructure for electronic payments, has resulted in a multitiered pricing system, with significant premiums for digital payments. This perverse effect counters the heavily lauded benefits of mobile payments in developing countries. We argue that the demand-side bias in government policies will not effectively counter persistent currency failures and the resultant inflation, both of which havea strong influence on payment choices. We recommend that the government should consider polices that will reduce merchant adoption costs to encourage widespread use of digital payment instruments, such as debit cards. Subjects: Microeconomics; Development Economics; Finance
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    Financial Sector Development and Economic Growth: Evidence from Zimbabwe
    (EconJournals, 2013) Ndlovu, Godfrey
    The relationship between financial system development and economic development has attracted interest of a number of researchers all over the world, however institutional differences and capital allocation variations between and within economies, make it very difficult to generalize findings and thus increasing the need for country-specific studies. This study examines the causal relation between financial system development and economic growth from a Zimbabwean perspective, based on two inter-related broad aims, the first being the established of cointegration relationship between the two and the ultimate direction of the causal relationship. Using multivariate Granger causality test the study finds existence of demand following financial development in Zimbabwe, there is unidirectional causality from economic growth to financial development. Financial system development is therefore an outcome of the pressure for institutional development in capital markets and introduction of modernized financial instruments. As such policy concern should focus on trade liberalization and other related activities in order to spur economic growth, since financial system development is a passive reaction to economic growth. Such policies might include investment promotion and removal of barriers for foreign investments.
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    An empirical test of the validity of the capital asset pricing model on the Zimbabwe stock exchange.
    (International Journal of Economics and Financial Issues., 2016) Nyangara, Melody R.; Nyangara, Davis; Ndlovu, Godfrey
    We test the empirical validity of the capital asset pricing model (CAPM) on the Zimbabwe Stock Exchange (ZSE) using cross-sectional stock returns on 31 stocks listed on the ZSE between March 2009 and February 2014. We conclude that, although the explanatory power of beta tends to fall rapidly for prediction horizons >6 months, beta significantly explains average monthly stock returns on the ZSE. Tests to validate the CAPM reject its validity for the ZSE however, primarily due to liquidity and skewness anomalies. We nevertheless fail to detect any size effects. There is encouraging evidence to suggest that the CAPM performs reasonably well in predicting average monthly returns over prediction horizons of between 3 and 6 months. We recommend that investors and analysts must exercise extreme caution in applying the CAPM. Furthermore, we discourage strategies based on the existence of a size premium on the ZSE. Instead, investors may consider neglected and negatively skewed stocks, albeit over appropriate horizons. Further research on other African Stock Markets will help verify if the optimal performance range of the CAPM is indeed 3-6 months. Development of standard continental proxy market portfolios will also improve the estimation of betas and enhance results of cross-country tests of the CAPM.