The Review of Finance and Banking

43-58

Authors: Simeon Papadopoulos

This paper investigates the implications of market power on issues of bank efficiency and stability in African developing countries. Using data from 229 banks in 7 African economies over the period 2009-2016, we calculate market power, bank efficiency and stability estimates at the bank level. We employed different specifications of the conventional Lerner indicator to measure the degree of market power and the Z-index to account for bank stability. Bank efficiency scores were estimated with the stochastic frontier analysis. Our results show that a higher degree of market power results in profit efficiency gains and enhanced bank stability, despite significant cost efficiency losses. Further, as banks gain market power, they also benefit from greater firm stability and reduced risk potential. This result supports the traditional view that increased competition may undermine bank stability. Our results also seem to suggest that efficiency Granger-causes market power indicating, that changes in profit efficiency precede changes in market power. Banks that are able to operate more profit efficiently will gain greater market power in comparison with their peers. Overall, our findings seem to suggest that higher degrees of market power bring about greater profit rates and enhanced bank stability.

79-90

Authors: Kedar Mukund Phadke and Manoj S Kamat

Securities and Exchange Board of India (SEBI) launched compulsory grading of IPOs in May-2007. The listing day and long-run performance of IPOs are analyzed to examine the effects of IPO certification among underpriced graded IPOs listed in India listed between fiscal years 2006 and 2013. Using a sample of 114 underpriced graded IPOs, this study reveals that (1) the effects of certification are demonstrated with higher-grade IPOs underpriced the least, (2) certification effects do not continue to persist over the long run, and (3) Price corrections are extreme over the long run with lower grade IPOs.

7-13

Authors: Cristina Ganja

The main purpose of this study is to investigate the existence of a liquidity premium on the Polish stock market, using the liquidity-adjusted CAPM. In order to measure the influence of the liquidity of stocks returns, there was constructed a liquidity factor using the newest high-low spread liquidity measure, developed by Corwin and Schultz (2012). The results have showed that there is a significant liquidity premium positively influencing the excess returns of stocks from the Poland market, and the premium is growing from the most liquid portfolio to the less liquid one.

24-36

Authors: Matthew O. Gidigbi, Kehinde M. Bello, Gbenga F. Babarinde

Energy pricing did not only have an implication on the indigent but on the national government as well. Petroleum subsidy tolerance impacts the government revenue of certainty but the extent of its impact needs to be determined. Therefore, it becomes imperative to assess the contribution of the petroleum subsidy on tax volatility. Data were sourced from the NNPC Annual Statistical Bulletin (ASB) for the year 1997, 2005, 2008 and 2016; Central Bank of Nigeria (CBN) Statistical Bulletin and Statement of Accounts and Annual Reports. An exploratory analysis was conducted on extracted data to generate other variables of interest such as subsidy on premium motor spirit, tax revenue volatility before proceeding to Lease Squares analyses. ARCH and GARCH models were applied to ascertain the volatility of tax revenue. Petroleum subsidy positively impacts tax revenue volatility; the impact was minimal but statistically significant at 1 per cent significance level. Exchange rate increased the tax revenue volatility by 5.10 point in the long-run, likewise gross domestic savings by 0.4 point in the long-run and both estimates were statistically significant at 1 per cent respectively. Both government expenditure and gross fixed capital formation reduced the tax revenue volatility at 0.05 and 0.03 point respectively and the estimates were statistically significant at 10 per cent and 1 per cent. The ECM showed that any deviation in the estimates would be restored within a year and this is statistically significant at 1 per cent. It was therefore recommended that the government should do more to manage and maintain appropriate exchange rate policy and keep up improving on its expenditure towards capital formation and investment in order to manage tax revenue volatility.