Papers by Demis H Gebreal
European Journal of Business and Management, 2018
This study contributes to capital structure literature by investigating the determinant factor of... more This study contributes to capital structure literature by investigating the determinant factor of financing decision of firms operating in 13 African countries with different financial, institutional, legal and economic environments. We employed categorical analysis so as to investigate the factors that influence the financing decision of firms operating in countries with underdeveloped and developed stock and banking sector. We also test in this study the pecking order and trade off theory is more statistically powerful in explaining firms’ financing decision of those African countries and the result confirms both pecking order and trade off theory. Our study found that asset tangibility, financial distress cost, profitability and Non debt tax shield are strong firm specific determinants of capital structure. This study also found that corporate tax rate, banking sector development, GDP growth rate, and lending interest rate are the most important country specific determinants of...
The main objective of this study is to identify Perceived benefits and challenges of e- banking a... more The main objective of this study is to identify Perceived benefits and challenges of e- banking adoption on Ethiopian private commercial banks. Mixed research design was employed and primary data was collected through questionnaires from employees and analyzed using quantitative (statistical) and qualitative methods. The study reveals that e-banking service provides benefit for both customers and banks in improving their public image and retain customers for long. Despite the benefit of e-banking service and investment on adopting; the system is not well strengthen in providing services due to several challenges. From these, low level of infrastructure, lack of legal frame works, security risk which lessen confidence of customer to use those technologies, lack of trust on the use of technological innovation and limited top management support are the major challenges of Ethiopian private commercial banks in respect to technology adoption. This study suggested that the government shou...
... iv DR. SHIVAKUMAR DEENE Asst. ... & Non Profi... more ... iv DR. SHIVAKUMAR DEENE Asst. ... & Non Profit Accounting; Industrial Organization; International Economics & Trade; International Finance; Macro Economics; Micro Economics; Monetary Policy; Portfolio & Security Analysis; Public Policy Economics; Real Estate; Regional ... DR. ...
European Journal of Innovation Management, 2019
Purpose The purpose of this paper is to investigate how firms in developing countries finance inn... more Purpose The purpose of this paper is to investigate how firms in developing countries finance innovation. Notably, the study seeks to investigate whether innovative firms exhibit financing patterns different from those of non-innovative ones. It also examines the effect of financing sources on firm’s probability to innovate. Design/methodology/approach The study utilizes firm-level data from the World Bank Enterprise Survey. From 28 African countries, 11,173 firms have been included in the sample. A statistical t-test is used for two independent samples and logistic regression models. Findings The results show that innovative firms, specifically innovative small- and medium-size firms exhibit financing patterns different from non-innovative peers. Further analysis indicates that there is no statistically significant difference between the financing patterns of innovative and non-innovative large firms. In Africa, innovation is mostly financed using internal sources and bank finance....
Research Journal of Finance and Accounting, 2018
In this study, we undertake the financial slack and innovation intensity linkage across industrie... more In this study, we undertake the financial slack and innovation intensity linkage across industries in Africa. We reported empirical evidence based on the data of 923 non-financial firms in 10 African countries. The industry-level robust regression result shows that the association between financial slack and innovation intensity varied across industries because of the heterogeneous nature R&D spending and financial slack accumulation of firms in different industries. That is, both a U-shape and an inverted U-shape relationship between slack and innovation intensity are confirmed. We finally discussed results and policy implications in detail. Keywords: Africa, Financial Slack, Innovation intensity, R&D investment
International Journal of Research in Commerce, IT and Management, 2017
Financial Slack and Firm Performance: Evidence from Africa, 2020
This study explores the relationship between financial slack and firm performance using a sample ... more This study explores the relationship between financial slack and firm performance using a sample of firms in African countries. This study employed a split sample analysis to unmask the real picture of slack and performance nexus. We also used a baseline sample (using 923 firms) analysis to show how the result is ambiguous. By using 530 African firms (212 high and 318 low financial firms), this study found that while high available slack has adverse effects, low available slack has a favourable impact on firm performance. However, the study confirms while high potential slack has a positive influence, low potential slack hurts African firms' performance. These results depicted that while agency theory offers a strong prediction when dealing with high available slack, the resource-based theory provides a reliable forecast when dealing with high potential slack. This study finally suggests the application of split-sample analysis in studies like this. Abstract-This study explores the relationship between financial slack and firm performance using a sample of firms in African countries. This study employed a split sample analysis to unmask the real picture of slack and performance nexus. We also used a baseline sample (using 923 firms) analysis to show how the result is ambiguous. By using 530 African firms (212 high and 318 low financial firms), this study found that while high available slack has adverse effects, low available slack has a favourable impact on firm performance. However, the study confirms while high potential slack has a positive influence, low potential slack hurts African firms' performance. These results depicted that while agency theory offers a strong prediction when dealing with high available slack, the resource-based theory provides a reliable forecast when dealing with high potential slack. This study finally suggests the application of split-sample analysis in studies like this.
Research paper, 2019
Purpose
The purpose of this paper is to investigate how firms in developing countries finance inn... more Purpose
The purpose of this paper is to investigate how firms in developing countries finance innovation. Notably, the study seeks to investigate whether innovative firms exhibit financing patterns different from those of non-innovative ones. It also examines the effect of financing sources on firm’s probability to innovate.
Design/methodology/approach
The study utilizes firm-level data from the World Bank Enterprise Survey. From 28 African countries, 11,173 firms have been included in the sample. A statistical t-test is used for two independent samples and logistic regression models.
Findings
The results show that innovative firms, specifically innovative small- and medium-size firms exhibit financing patterns different from non-innovative peers. Further analysis indicates that there is no statistically significant difference between the financing patterns of innovative and non-innovative large firms. In Africa, innovation is mostly financed using internal sources and bank finance. Equity finance and bank finance have shown a higher effect followed by internal finance, finance from non-bank financial institutions and trade credit finance on firms’ probability to innovate.
Practical implications
The management of innovative firms should reduce dependency on short-term and retained earning financing and increase the use of long-term instruments improve innovation performance.
Social implications
A pending policy task for African leaders is to design and evaluate reforms to create a strong financial sector that willing to support the innovation process.
Originality/value
This study contributes to the existent literature on finance of innovation by examining how firms finance innovation activities in developing countries. This study provides evidence on how innovative firms exhibit financing patterns different from non-innovative ones from developing countries.
Keywords:
Africa, Innovation, Financing sources, Innovation financing, Innovative firms
Organizational theory claimed favorable effect of slack on performance and the agency theory;
sup... more Organizational theory claimed favorable effect of slack on performance and the agency theory;
supported an adverse influence of slack on performance. This study explored the association between the
financial slack and the financial performance of firms in Africa. This study further rexamined the mediating
effect of the banking sector and the stock market development on the slack-performance nexus. While the
firm performance is measured as the return on assets (ROA), and return on sales (ROS), the slack
components are categorized as available, potential and recoverable slacks. We used firm-level data from
457 firms in 13 African countries from 2006 to 2015. The finding of this study supported the organizational
theory that favors a positive effect of slack on performance. The result of mediation analysis shows that
both the banking sector and the stock market development have no strong mediating effect on the slack-performance relationship of firms in Africa. This study finally offers micro and macro level policy
implications
In this study, we undertake the financial slack and innovation intensity linkage across industrie... more In this study, we undertake the financial slack and innovation intensity linkage across industries in Africa. We reported empirical evidence based on the data of 923 non-financial firms in 10 African countries. The industry-level robust regression result shows that the association between financial slack and innovation intensity varied across industries because of the heterogeneous nature R&D spending and financial slack accumulation of firms in different industries. That is, both a U-shape and an inverted U-shape relationship between slack and innovation intensity are confirmed. We finally discussed results and policy implications in detail.
Article, 2018
In this study, we undertake the financial slack and innovation intensity linkage across industrie... more In this study, we undertake the financial slack and innovation intensity linkage across industries in Africa. We reported empirical evidence based on the data of 923 non-financial firms in 10 African countries. The industry-level robust regression result shows that the association between financial slack and innovation intensity varied across industries because of the heterogeneous nature R&D spending and financial slack accumulation of firms in different industries. That is, both a U-shape and an inverted U-shape relationship between slack and innovation intensity are confirmed. We finally discussed results and policy implications in detail.
The main objective of this study is to identify Perceived benefits and challenges of e-banking ad... more The main objective of this study is to identify Perceived benefits and challenges of e-banking adoption on Ethiopian private commercial banks. Mixed research design was employed and primary data was collected through questionnaires from employees and analyzed using quantitative (statistical) and qualitative methods. The study reveals that e-banking service provides benefit for both customers and banks in improving their public image and retain customers for long. Despite the benefit of e-banking service and investment on adopting; the system is not well strengthen in providing services due to several challenges. From these, low level of infrastructure, lack of legal frame works, security risk which lessen confidence of customer to use those technologies, lack of trust on the use of technological innovation and limited top management support are the major challenges of Ethiopian private commercial banks in respect to technology adoption. This study suggested that the government should issue laws that govern e-banking operation, security technologies should be strengthened. Awareness about e-banking should be created using different approaches. Moreover e-banking technologies should be given in a simple and easy to use way.
There have not been empirical studies that address the financial performance of Ethiopian insuran... more There have not been empirical studies that address the financial performance of Ethiopian insurance companies in Ethiopia. This study was undertaken to evaluate the financial performance of non-life insurance industry in Ethiopia by using CARAMEL frame work. The researcher selected 10 insurance companies from the total of 15 based on their year of establishment. Secondary data collected from the individual insurance companies and from the National Bank of Ethiopia from the fiscal year of 2008 to 2012 was used for the completion of the study. The model employed for this study is ROA=α+β1KTAit+β2ONETA1it+β3Rit+β4Ait+β5MEit +β6EPR3it+β7LRit +ε. ROA has been used as the dependent variable explained by capital adequacy, assets quality, re-insurance, actuarial issues, management efficiency, earning and profitability and liquidity. Multiple linear regression was applied. From the multiple linear regression, it was found that assets quality and combined ratio have negative relationship whereas capital adequacy and retention ratio have positive relationship with performance (ROA) of insurance industry in Ethiopia. One of the objectives of the study is that to identify the major factors that affect the financial performance of insurance industry in Ethiopia and it was found from the regression result that the major factors are capital adequacy, assets quality, re-insurance and combined ratio. The researcher recommended that the management and regulators of Insurance companies in Ethiopia should give due attention on capital adequacy and set minimum requirement for the capital adequacy of insurance industry, assets quality and re-insurance. 56 3. For the improvement of reinsurance ratio, proper management of premium will help insurers to retain and manage maximum risk efficiently. 4. Other researchers should incorporate the financial and non financial performance of both non life and life insurance companies in Ethiopia.
This study contributes to capital structure literature by investigating the determinant factor of... more This study contributes to capital structure literature by investigating the determinant factor of financing decision of firms operating in 13 African countries with different financial, institutional, legal and economic environments. We employed categorical analysis so as to investigate the factors that influence the financing decision of firms operating in countries with underdeveloped and developed stock and banking sector. We also test in this study the pecking order and trade off theory is more statistically powerful in explaining firms' financing decision of those African countries and the result confirms both pecking order and trade off theory. Our study found that asset tangibility, financial distress cost, profitability and Non debt tax shield are strong firm specific determinants of capital structure. This study also found that corporate tax rate, banking sector development, GDP growth rate, and lending interest rate are the most important country specific determinants of capital structure. Rule of law is found to be strong determinants of capital structure of African firms. 1. Introduction Since the seminal work of Modigliani and Miller (1958, 1963), numerous literatures have been documented regarding theoretical and empirical studies of investigating the determinant factors of capital structure. The Modigliani–Miller theory (MM theory) states that, in the absence of taxes, bankruptcy costs, and asymmetric information, and in an efficient or perfect capital market, firm's value is independent of how it is financed, regardless of whether firm's capital comprises of equities or debt, or both, or what the dividend policy is. However, when one or more of the MM assumptions such as perfect capital markets and tax are relaxed, many economists have shown how firm value may vary with changes in the debt-equity mix that leads to introduction alternative theories. Accordingly, DeAngelo and Masulis (1980) introduced static theory which assumes that the optimal debt level is a result of a trade-off between the tax advantages of debt and financial distress costs. According to this theory, the optimum capital structure does exist and a firm is considered as adjusting a target debt level and gradually moving towards it. The firm's optimum capital structure will encompass the trade-off between the effects of corporate and personal taxes, bankruptcy costs and agency costs, etc. On the other hand, the pecking order theory, first introduced by Myers and Majluf (1984), states that there is no well-defined target debt ratio rather choose retained earnings as their main source of funds for investment followed by less risky debt and risky external equity financing. Such preference of using internal funds for investment financing is due to the existence of the asymmetric information problem in credit market. Several empirical studies have confirmed the basic Myers– Majluf idea, such as Brennan and Kraus (1987), Constantinides and Grundy (1989), Krasker (1986), Heinkel and Zechner (1990), Narayanan (1988), and Noe (1988). Moreover, previous researchers investigated the determining factors of the capital structure and identified firm size, profitability; growth opportunities and tangibility of assets are the most important firm specific determinants of firm's capital structure (Rajan
This study is conducted on the challenges and opportunities of life insurance business in Ethiopi... more This study is conducted on the challenges and opportunities of life insurance business in Ethiopia. The study is mainly conducted using primary data. Eight insurance companies from the total of 17 insurance companies, which are providing life insurance services, are included in the study as a sample. The study found that of awareness of people towards life insurance, religious, habit of saving of the people and low level of urban to total population ratio and illiteracy are the major demographic challenges of life insurance business in Ethiopia. It was indicated in the study that low level of income of the society and the interest are the major economic challenges for the development of life insurance whereas the banking sector development, a decrement in an annual inflation rate can be the opportunities that can positively help the development of life insurance business in Ethiopia. The study recommended that insurance companies should create awareness with respect to life insurance, training should be provided for insurance officials and strong training centre should be established.
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Papers by Demis H Gebreal
The purpose of this paper is to investigate how firms in developing countries finance innovation. Notably, the study seeks to investigate whether innovative firms exhibit financing patterns different from those of non-innovative ones. It also examines the effect of financing sources on firm’s probability to innovate.
Design/methodology/approach
The study utilizes firm-level data from the World Bank Enterprise Survey. From 28 African countries, 11,173 firms have been included in the sample. A statistical t-test is used for two independent samples and logistic regression models.
Findings
The results show that innovative firms, specifically innovative small- and medium-size firms exhibit financing patterns different from non-innovative peers. Further analysis indicates that there is no statistically significant difference between the financing patterns of innovative and non-innovative large firms. In Africa, innovation is mostly financed using internal sources and bank finance. Equity finance and bank finance have shown a higher effect followed by internal finance, finance from non-bank financial institutions and trade credit finance on firms’ probability to innovate.
Practical implications
The management of innovative firms should reduce dependency on short-term and retained earning financing and increase the use of long-term instruments improve innovation performance.
Social implications
A pending policy task for African leaders is to design and evaluate reforms to create a strong financial sector that willing to support the innovation process.
Originality/value
This study contributes to the existent literature on finance of innovation by examining how firms finance innovation activities in developing countries. This study provides evidence on how innovative firms exhibit financing patterns different from non-innovative ones from developing countries.
Keywords:
Africa, Innovation, Financing sources, Innovation financing, Innovative firms
supported an adverse influence of slack on performance. This study explored the association between the
financial slack and the financial performance of firms in Africa. This study further rexamined the mediating
effect of the banking sector and the stock market development on the slack-performance nexus. While the
firm performance is measured as the return on assets (ROA), and return on sales (ROS), the slack
components are categorized as available, potential and recoverable slacks. We used firm-level data from
457 firms in 13 African countries from 2006 to 2015. The finding of this study supported the organizational
theory that favors a positive effect of slack on performance. The result of mediation analysis shows that
both the banking sector and the stock market development have no strong mediating effect on the slack-performance relationship of firms in Africa. This study finally offers micro and macro level policy
implications
The purpose of this paper is to investigate how firms in developing countries finance innovation. Notably, the study seeks to investigate whether innovative firms exhibit financing patterns different from those of non-innovative ones. It also examines the effect of financing sources on firm’s probability to innovate.
Design/methodology/approach
The study utilizes firm-level data from the World Bank Enterprise Survey. From 28 African countries, 11,173 firms have been included in the sample. A statistical t-test is used for two independent samples and logistic regression models.
Findings
The results show that innovative firms, specifically innovative small- and medium-size firms exhibit financing patterns different from non-innovative peers. Further analysis indicates that there is no statistically significant difference between the financing patterns of innovative and non-innovative large firms. In Africa, innovation is mostly financed using internal sources and bank finance. Equity finance and bank finance have shown a higher effect followed by internal finance, finance from non-bank financial institutions and trade credit finance on firms’ probability to innovate.
Practical implications
The management of innovative firms should reduce dependency on short-term and retained earning financing and increase the use of long-term instruments improve innovation performance.
Social implications
A pending policy task for African leaders is to design and evaluate reforms to create a strong financial sector that willing to support the innovation process.
Originality/value
This study contributes to the existent literature on finance of innovation by examining how firms finance innovation activities in developing countries. This study provides evidence on how innovative firms exhibit financing patterns different from non-innovative ones from developing countries.
Keywords:
Africa, Innovation, Financing sources, Innovation financing, Innovative firms
supported an adverse influence of slack on performance. This study explored the association between the
financial slack and the financial performance of firms in Africa. This study further rexamined the mediating
effect of the banking sector and the stock market development on the slack-performance nexus. While the
firm performance is measured as the return on assets (ROA), and return on sales (ROS), the slack
components are categorized as available, potential and recoverable slacks. We used firm-level data from
457 firms in 13 African countries from 2006 to 2015. The finding of this study supported the organizational
theory that favors a positive effect of slack on performance. The result of mediation analysis shows that
both the banking sector and the stock market development have no strong mediating effect on the slack-performance relationship of firms in Africa. This study finally offers micro and macro level policy
implications