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Capital structure is one of the crucial decisions managers must make that can affect a firm's short-term and long-term value maximization prospects. Though extant studies have shown capital structure significantly affects profits, researchers have struggled to find an optimal mix of capital structure ideal for value maximization due to the influence of macro and micro factors. There is therefore the need for this to be properly studied contextually. Building on the Pecking Order Theory, this study examines the capital structure effects on profitability from a short-term, long-term, and total debt financing perspective on listed Ghanaian firms between 2003 and 2013. An unbalanced panel data of 23 listed manufacturing and service firms that are listed on the Ghanaian Stock Exchange are subjected to robust maximum likelihood heteroskedastic linear estimation models. Three main regressions that are run explain the short-term debt, long-term debt and total debt effect on firm profitability. The results show that short-term debt exhibits a positive effect on return on equity (ROE), whilst the relationship reverses for long-term debt, indicating that short-term financing was beneficial to firms rather than long-term financing. Also, total debt exhibited a negative and nonsignificant effect on return on equity. The author also found that firm liquidity exhibited a more pronounced positive effect on profitability for firms with short-term debt than long-term debt. Financial risk negatively affected the returns of only firms with short-term debt. Market share had a pronounced positive effect on ROE across firms whilst firm age exhibited a less pronounced positive effect on firm profits. Firm size and growth had increasing profit effects but was not significant in the dataset. Financial risk also negatively affected profits, but this was only significant in firms with short-term debt structures. This study finds that managers need to adopt more short-term debt financing rather than long-term financing as the former leads to more profits. There is a need for policymakers to develop long-term debt financing structures to compete in the Ghanaian debt market. It is also recommended that managers exercise due care when supplementing equity capital with debt. JEL Classifications: L11, L22, L25 and G32 Keywords: Capital Structure; Profitability; Firm Performance; Ghana, INTRODUCTION Globalization and financial liberalization continue to expand investment and financing options available for firms, businesses, and institutions (Shim 2022; Begenau & Salomao 2019). With capital markets expanding, firms have [...]

Capital structure is one of the crucial decisions managers must make that can affect a firm's short-term and long-term value maximization prospects. Though extant studies have shown capital structure significantly affects profits, researchers have struggled to find an optimal mix of capital structure ideal for value maximization due to the influence of macro and micro factors. There is therefore the need for this to be properly studied contextually. Building on the Pecking Order Theory, this study examines the capital structure effects on profitability from a short-term, long-term, and total debt financing perspective on listed Ghanaian firms between 2003 and 2013. An unbalanced panel data of 23 listed manufacturing and service firms that are listed on the Ghanaian Stock Exchange are subjected to robust maximum likelihood heteroskedastic linear estimation models. Three main regressions that are run explain the short-term debt, long-term debt and total debt effect on firm profitability. The results show that short-term debt exhibits a positive effect on return on equity (ROE), whilst the relationship reverses for long-term debt, indicating that short-term financing was beneficial to firms rather than long-term financing. Also, total debt exhibited a negative and non-significant effect on return on equity. The author also found that firm liquidity exhibited a more pronounced positive effect on profitability for firms with short-term debt than long-term debt. Financial risk negatively affected the returns of only firms with short-term debt. Market share had a pronounced positive effect on ROE across firms whilst firm age exhibited a less pronounced positive effect on firm profits. Firm size and growth had increasing profit effects but was not significant in the dataset. Financial risk also negatively affected profits, but this was only significant in firms with short-term debt structures. This study finds that managers need to adopt more short-term debt financing rather than long-term financing as the former leads to more profits. There is a need for policymakers to develop long-term debt financing structures to compete in the Ghanaian debt market. It is also recommended that managers exercise due care when supplementing equity capital with debt. JEL Classifications: L11, L22, L25 and G32 Keywords: Capital Structure; Profitability; Firm Performance; Ghana, INTRODUCTION Globalization and financial liberalization continue to expand investment and financing options available for firms, businesses, and institutions (Shim 2022; Begenau & Salomao 2019). With capital markets expanding, firms have [...]

The Southern African Customs Union is the oldest customs union in the world and the member states form a currency union with the South African Rand being the regional currency anchor. Therefore, currency movements amongst SACU member are dependent on the developments on the Rand which, in turn, can affect stock market development in the region. We examine the time-frequency relationship between exchange rates and stock market returns in SACU countries using continuous wavelet transforms. Our empirical analysis is two-staged. Firstly, we employ wavelet power spectrum to examine the time-frequency properties of the individual series. Secondly, we use wavelet coherence analysis and phase dynamics to examine the synchronization between the variables in a time-frequency space. Our findings show stronger (weaker) exchange rate-stock returns relations are found during periods of higher (lower) inflation whereas we observe a stronger (weaker) relationship during periods of lower interest rate environment. Moreover, we find more significant long-run relationships for countries with more independent monetary policy (South Africa and Botswana) whereas these relations are more prominent over the short-run for countries with pegged exchange rates (Eswatini and Namibia). We also observe that periods of oil and currency shocks impact the exchange rate-stock returns relationship in SACU countries with pegged exchange rates (Eswatini and Namibia). Our findings bear important implications for different stakeholders. For instance, this study has implications for exchange rate policy as it addresses the issue of whether the exchange rate can be used to improve market performance or exchange rate developments spillover into the stock market. Furthermore, corporate managers and stock market participants would be interested in our findings as it identifies periods of market inefficiency when exchange rates can be used to beat the stock market. JEL Classifications: C1, C2, C5 and G1 Keywords: Continuous wavelet transforms, Wavelet coherence, exchange rates, stock market, SACU, INTRODUCTION Following widespread changes in the international exchange rate system and the increased globalization of capital markets experienced over the last quarter of the century, equity and currency markets have [...]

Several studies have used various datasets and methodologies to analyze the relationship between bilateral trade and income convergence among trading partners. However, most studies have not paid attention to the effect that income levels and nature of bilateral trade have on the speed of income convergence. In this paper, we argue that the income levels of trading partners and the nature of bilateral trade play important role in the relationship between bilateral trade and international income convergence. To account for the effect of income levels of trading partners, this paper presents an approach that explicitly accounts for bilateral trade among high-income (OECD) countries, bilateral trade between high-income and low-income (SSA) countries, and bilateral trade among low-income (SSA) countries. We also used total trade data for 25 OECD countries and 30 Sub-Saharan African countries over the period 1980-2018 to avoid the potential bias for selecting certain countries based on arbitrary percentage of trade relationship. We used the 2SLS estimations technique to avoid endogeneity problems due to the nature of the dataset. The paper finds that the bilateral trade-income convergence relationship for OECD to SSA is the strongest. This result throws light on the claim that the nature of bilateral trade between high-income and low-income countries promotes one directional knowledge spillover from high-income to low-income countries which enables low-income countries to adopt new technologies and grow faster than their high-income counterparts. Also, bilateral trade among OECD countries, which mostly comprises of differentiated products, promotes descent income convergence among them. However, bilateral trade among SSA countries has the least effect on income convergence. Findings of the study have important implications for bilateral trade among low-income countries and between low income and high income countries. First, if SSA countries want to develop and catch up with their rich counterparts, they should continue to promote free trade with high income countries by dismantling remaining protection policies. Second, the African Continental Free Trade Area's (AfCFTA) efforts to boost the manufacturing sector through industrialization is in the right direction to promote the production of more differentiated products in Africa which will create growth in income for member countries as they trade more. Finally, there is the need for SSA countries to increase investment rates and improve human capital accumulation to enable them to accelerate the adoption of new technologies and grow faster than their high-income counterparts, while bridging the income gap between them through trade. JEL Classifications: F11; F14; O33; O47 Keywords: Economic Openness; Income Convergence; Bilateral Trade; Economic Growth; 2SLS Estimator, INTRODUCTION The implications of international trade on income differential among trading nations have been professionally researched since the works of neoclassical growth theorists (Solow, 1956; Swan 1956) which generated the [...]

Specialization and intensification have been the main focuses of agricultural development and modernization for decades, among those who claim that doing so will increase agricultural output. Specialization and commercialization in agriculture are linked to greater efficiency than subsistence farming, as these can boost the production and competitiveness of smallholder farmers. However, in recent years, some have questioned this model's resilience and long-term viability. Specialization, as well as increasing output and commercialization, are part of the agricultural transformation processes. Research needs to be done to answer why farmers switch to high-value crop production to increase profits and deal with the resultant issues. The question of whether crop specialization would lead to greater commercialization within the Ghanaian context requires an answer. This study explores the link between crop specialization and agricultural commercialization by utilizing secondary data from the Ghana Feed the Future baseline survey involving a total sample of 2,952 farm households. As a novelty, the study addresses the seeming simultaneity between crop specialization and agricultural commercialization that has been overlooked in the literature. The bivariate probit regression result indicates that estimating separate univariate probit models is inappropriate. Therefore, failure to jointly model crop specialization and commercialization could yield biased estimates. This study applies the recursive bivariate probit model to establish a causal relationship between crop specialization and agricultural commercialization. The findings have revealed that crop specialization stimulates commercialization. The synergy between crop specialization and agricultural commercialization has implications for enhancing food security and increasing farmers' incomes. To improve commercialization and crop specialization, the Government of Ghana should intensify land registration and modify the land tenure systems to make lands easily accessible to farmers. JEL classifications: C35, Q12, 13 Keywords: Agricultural commercialization, Recursive bivariate probit model, Crop specialization, Ghana Contact author's email address: ssekyi@uds.edu.gh/ssekyi@ubids.edu.gh, INTRODUCTION Agricultural commercialization is central to the sector's development strategies in Ghana. Over the years, development policies have focused on the modernization and commercialization of the agriculture sector, intending to [...]

Specialization and intensification have been the main focuses of agricultural development and modernization for decades, among those who claim that doing so will increase agricultural output. Specialization and commercialization in agriculture are linked to greater efficiency than subsistence farming, as these can boost the production and competitiveness of smallholder farmers. However, in recent years, some have questioned this model's resilience and long-term viability. Specialization, as well as increasing output and commercialization, are part of the agricultural transformation processes. Research needs to be done to answer why farmers switch to high-value crop production to increase profits and deal with the resultant issues. The question of whether crop specialization would lead to greater commercialization within the Ghanaian context requires an answer. This study explores the link between crop specialization and agricultural commercialization by utilizing secondary data from the Ghana Feed the Future baseline survey involving a total sample of 2,952 farm households. As a novelty, the study addresses the seeming simultaneity between crop specialization and agricultural commercialization that has been overlooked in the literature. The bivariate probit regression result indicates that estimating separate univariate probit models is inappropriate. Therefore, failure to jointly model crop specialization and commercialization could yield biased estimates. This study applies the recursive bivariate probit model to establish a causal relationship between crop specialization and agricultural commercialization. The findings have revealed that crop specialization stimulates commercialization. The synergy between crop specialization and agricultural commercialization has implications for enhancing food security and increasing farmers' incomes. To improve commercialization and crop specialization, the Government of Ghana should intensify land registration and modify the land tenure systems to make lands easily accessible to farmers. JEL classifications: C35, Q12, 13 Keywords: Agricultural commercialization, Recursive bivariate probit model, Crop specialization, Ghana, INTRODUCTION Agricultural commercialization is central to the sector's development strategies in Ghana. Over the years, development policies have focused on the modernization and commercialization of the agriculture sector, intending to [...]