African Journal of Finance and Management

Culture, legal origin and the predictive ability of IFRS earnings and cash flows

Shaban Ngole — Tue, 21 Aug 2018 00:00:00 +0000

This paper addresses the question whether the culture prevalent in African countries and mixed legal origins impact on the earnings and cash flows predictability role of International Financial Reporting Standards (IFRS). It studies five African countries, namely, South Africa, Kenya, Botswana, Egypt and Morocco for the period spanning from 2002 to 2009. The study employs financial data similar to Ngole (2016); however, the culture data are obtained from Hofstede (1980, 2001) and House et al. (2004). The legal origins’ classifications were obtained from La Porta et al. (1997, 1998) and data are analyzed using STATA. The paper extends the Kim and Kross (2005) model by introducing two dummy variables, namely, the conservative culture and legal origin dummies to capture the incremental impact of culture and legal origin on IFRS earnings and cash flows predictability. Generally, and consistent with predictions, the results indicate that conservative culture is associated with a reduction (an increase) in the predictive ability of cash flows (earnings). On the other hand, they do not provide support to the contention that IFRS increases the predictive ability of earnings and cash flows more in common law than in code law firms. The findings imply that while culture matter to the predictive ability of IFRS earnings and cash flows, legal origin is indifferent. Future research may use different constructs such as the rule of law as a measure of overall governance institutions, instead of the common-code law dichotomization. Also, future studies may increase the sample size in terms of firms and countries in order to increase the diversity of culture and legal origins.

Keywords: IFRS, earnings management, prediction, culture, legal origin

JEL Classification: G14. M40. M41

Commercial banks portfolio holdings behaviour: does size and ownership matter? Evidence from Tanzania

Tobias A. Swai, Daudi R.V.B. Lwiza, Michael O. Ndanshau — Tue, 21 Aug 2018 00:00:00 +0000

This study examines the portfolio behaviour of commercial banks in Tanzania by using panel financial data of 14 banks from 1998 to 2010 on a quarterly basis, making 52 quarters and 728 observations. The sampled banks had more than 85% of the total commercial banks assets on average in the time of the study. The study objectives were to analyze the portfolio behaviours of commercial banks in Tanzania with respect to the size of a bank and ownership. Financial statements data was collected from quarterly mandatory publication of the bank data for the individual banks, and were analysed based on an ordinary least squares model. Findings revealed that banks do hold their portfolios with very little differentiation amongst themselves, which indicates that there is little or same innovation patterns. Assets allocation is more with loan products and investments in government securities. Large banks and foreign banks enjoy returns from the interbank lending due to their relatively large capital and assets base. The study calls for innovation, organizational learning and specialization of banks, and more oversights on a foreign bank entry as well as for large banks.

Keywords: commercial banks, portfolio behaviour, foreign banks, bank size, bank ownership

Impact of foreign direct investment and exports on economic growth in Tanzania: a co-integration and Error Correction Model (ECM) analysis

John Kingu — Tue, 21 Aug 2018 00:00:00 +0000

This article investigates the impact of exports and foreign direct investments on economic growth in Tanzania. This study utilizes secondary data from the Ivan Kushnir’s Research Centre database and the National Bureau of Statistics in Tanzania for the period spanning from 1970 to 2012. Furthermore, the study examined the unit root test using the Augmented Dickey Fuller test and co-integration test using Engle-Granger residuals co-integration test and Johansen co-integration test. Thereafter it employed error correction model to examine the impact of exports and foreign direct investments (FDIs) on economic growth in Tanzania. The empirical results reveal that variables are non-stationary at level and stationary at first difference. Again, all variables are found to be co-integrated, implying that all have long-run relationship and variables adjusting to the long-run equilibrium at the speed of 23 percent per annum. Further results shows that exports have significant impact on economic growth in Tanzania, whereas foreign direct investments have negative impacts on economic growth in Tanzania. Therefore, from the obtained empirical results, particularly on foreign direct investments, the government ought to check the proper type of foreign direct investments between brown and green FDIs in boosting the economy. Furthermore, FDI sectoral examination is important rather than general impacts on the economic growth.

Keywords: exports, economic growth in Tanzania, foreign direct investments, error correction model

Social capital’s integrative and facilitative role in organizations: a literature review

Freddy J. Gamba — Tue, 21 Aug 2018 00:00:00 +0000

This paper explores social capital‘s integrative and facilitative roles in organizations‘ socio-economic life. Based on literature review, it leans on existing literature on social capital dimensions and its two measurement approaches: synthetic based approach and outcome based approach. The main argument of the paper is that social capital is an enabler and integrator of other forms of organizational resources, processes and systems; and that without it; it is difficult to acquire financial, physical, human, intellectual, cultural and technological capital/resources which are important for socio-economic endeavours. Moreover, the paper shows how social capital plays a role in the creation of synergy and elimination of exclusivity, hence improving welfare and managing diversity in organizations. It concludes that reform and transformation in organizations would have impact if done concurrently with social capital institutionalization to promote economic synergy, hierarchical linkage and honest exertion of energy in production functions in all types and sizes of organizations. The paper recommends elevating social capital as a one-stop conceptualized multi-dimensional solution for managing organizations.

Keywords: social capital, social structure, social relations, organizations

Challenges of journal collection development in selected academic libraries in Tanzania

Vincent T. Msonge — Tue, 21 Aug 2018 00:00:00 +0000

This study investigates the challenges that academic and research libraries in Tanzania experience in their quest to enhance and sustain systematic journal collection development and management and sought views and suggestions in order to ensure constant availability and access to scholarly journals. The study adopted the Evans Model of Collection Development. Six purposively selected institutions participated in this study. A triangulation approach for data gathering was adopted. In the first instance, a structured and standardized self-administered questionnaire was used to collect data from 339 respondents who were randomly selected. The population sample comprised library staff, teaching staff and researchers. Key informant interviews were conducted with 6 library directors and 6 heads of periodicals sections to complement the questionnaire survey. Data were analyzed using SPSS and content analysis. Key findings reveal that journal collection development in academic and research libraries in Tanzania is constrained by inadequate funding, lack of policies to guide collection development, low level of involvement of stakeholders in the selection process, lack of support and commitment from management, and limited training opportunities for library staff on IT skills. Findings further revealed that journal collection development is donor-dependent. A major recommendation is that librarians should lobby top management to consistently allocate adequate funding for journal collection development activities, and also explore alternative ways to generate income internally to meet user information needs.

Keywords: collection development, academic libraries, collection development policy

Factors influencing people’s participation in Financial Pyramid Schemes (FPS) in Tanzania: a case of DECI

Henry Chalu — Tue, 21 Aug 2018 00:00:00 +0000

Financial pyramid schemes (FPS) are illegal economic activities. Nonetheless, they have been coming out and offered to the general public. These fraudulent endeavours often collapse within few years of operation, resulting into awesome misplays to individual participants, their families and the nation at large. While the characteristics and/or consequences of FPS have been widely explored in the literature, comparatively little is known as regards to what influences people to join FPS in the environment in which they live and make decisions. This study aims to investigate factors influencing people to join FPSs in Tanzania despite their limitations, using the case of a religious-based financial pyramid scheme in Tanzania known as the Development Entrepreneurship for Community Initiatives (DECI). The theoretical basis of this study is that factors for peoples‘ participation in FPS can be grouped into four categories, namely: demographic (psychological), economic, social, as well as moderating factors termed regulatory framework. The study used primary data which were collected using a structured questionnaire from 60 respondents from the three municipals of Dar es Salaam city. The data collected were analysed using a logit model that was fitted to estimate the impact of several demographic, economic and social factors on the decision whether to participate in FPS or not. The results indicate that all categories of factors influenced peoples‘ decision to participation in FPS, though not uniformly. The study also reveals that the influence of regulatory framework depends on awareness of legal requirement because awareness was found to have negative influence on FPS participation. This study makes two important contributions: first, it extends the literature on factors influencing FPS participation; and second, it adds to the theoretical framework supporting the link between economic, psychological and social factors with investment decisions of individuals.

Keywords: financial pyramid schemes (FPS), Ponzi schemes, MLM, investment fraud