Department of Banking and Financehttp://ugspace.ug.edu.gh:8080/handle/123456789/50212024-03-28T21:25:29Z2024-03-28T21:25:29ZRenewable Energy Diffusion In Ghana: Investment Decision Making Strategies Under UncertaintyOfori, C.G.http://ugspace.ug.edu.gh:8080/handle/123456789/413172024-02-19T09:54:22Z2021-09-01T00:00:00ZRenewable Energy Diffusion In Ghana: Investment Decision Making Strategies Under Uncertainty
Ofori, C.G.
Climate change and energy sustainability concerns have spurred renewed interest in the
transitioning from fossil fuels to cleaner sources of energy generation, of which renewable energy
generation plays an important role. However, the conversation surrounding renewable energy
integration goes beyond environmental considerations to include other factors, such as ensuring
profitability and increased investment. Renewable energy integration requires substantial buy-in
from governments, investors, and businesses, particularly Small and Medium Scale Enterprises.
However, securing the buy-in from these stakeholders, especially investors and businesses,
requires that a business case be made for them in an environment riddled with uncertainties. Also,
creating value within the uncertain environment requires investment decisions regarding the
context-specific issues that could aid or offset profitability and the potential for renewable energy
integration.
This thesis seeks to provide decision-making strategies for large-scale and small-scale renewable
energy investments in uncertain environments. Three independent studies are carried out with
specific objectives that seek to achieve the overall aim of the study. The first study analyses the
value of delaying utility-scale renewable energy investments. The second study analyses the costsaving
potential for SMEs to switch to renewable energy technologies. Lastly, the third study
presents a cost minimisation model for renewable energy investments while providing approaches
towards financing same.
Using real options models and linear programming models, the study outlines several findings that
have implications for research, policy and investment decisions. The studies have varying
implications for businesses in providing investment strategies for utility-scale and small-scale
renewable energy investment. It also contributes largely to the pool of literature on renewable
energy and investments using rigorous methodological approaches that consider inherent
uncertainties in the business environment.
First, there is value in delaying utility-scale renewable energy investments until the uncertainties
are relaxed. However, delaying investments have opportunity costs and must be matched with the
gains in delays to create an optimal investment timing point that maximises the option value for
investors. Other factors that affect the option value for renewable energy investments include the volatility resulting from the upside potential of the investments. Also, governments are required to
create an environment that increases the demand for renewable energy technologies.
Second, SMEs obtain significant value when they replace, either wholly or partially, conventional
energy supply sources with renewable energy technologies. This replacement allows for renewable
energy technologies to be counted as part of the primary energy sources for the SME. However,
SMEs do not obtain significant investment value when renewable energy technologies are used
only for backup energy supply. SMEs are also required to consider the capacity factor of renewable
energy technologies, tariffs for conventional power supply, system reliability of conventional
systems and the investment costs for renewable energy generation as essential factors for
renewable energy investments.
Third, SMEs can finance their capacity expansion and renewable energy integration plans through
debt financing amortised using savings they obtain when they use renewable energy technologies.
However, considering the investment options, the study results show that in situations where
savings from conventional tariffs are not enough to meet required loan repayments, delayed
investments could yield substantial value for SMEs. The results further show that investment
pooling can prove helpful to SMEs as unionised groups can drive trust from financial institutions.
This approach is beneficial for SMEs that work within an industrial enclave.
PhD. Finance
2021-09-01T00:00:00ZEnvironmental Risk And Foreign Direct Investment: The Role Of Financial Sector Development And Tax PoliciesYiadom, E.B.http://ugspace.ug.edu.gh:8080/handle/123456789/408462023-12-07T09:50:20Z2022-07-01T00:00:00ZEnvironmental Risk And Foreign Direct Investment: The Role Of Financial Sector Development And Tax Policies
Yiadom, E.B.
Responding to climate change is at the forefront of policy and research at this crucial moment of
the earth’s history. A two-pronged approach has emerged: mitigation and adaptation. This study
relates to both the climate mitigation and adaptation strategies to resolving climate change.
Specifically, the thesis contributes to the literature by (i) examining the moderating role of
financial sector development on the effect of foreign direct investment (FDI) on environmental
risk, (ii) decomposing financial sector development into its subcomponents: access, depth and
efficiency, and examining the extent to which they aid or prevent foreign direct investment from
harming the environment, (iii) exploring whether countries with ‘weak’ or better still low tax rate attract ‘dirty’ FDI to deteriorate their environment, (iv) investigating the impact of carbon tax
adoption on foreign direct investment. The study employs standard approaches namely the
generalized method of moments (GMM), dynamic panel threshold models, fixed effects, random
effects, sample splitting, and partial effects computations to examine the linkages.
The results from the various estimation strategies show that, the unmitigated effect of FDI on
environmental risk is detrimental. However, FDI conditioned on the local financial sector
development minimizes environmental risk. This means that countries that have a well-developed
financial sector is able to channel FDI into green projects that improve the quality of the
environment. Further, the dynamic panel threshold model reveals that financial development
increases environmental risk at low regimes of the threshold but high regimes of financial
development have the ability to reduce it. This means that the level of financial sector development
matters in accounting for its impact on environmental risk. Therefore, assuming a linear
relationship between the two variables could be problematic. This brings clarity to the literature on why some studies report positive effect of financial development on environmental risk and
others show negative effect.
We further decomposed financial development into its subcomponents to help examine their
behaviours and recommend specific policy directions. The findings reveal that financial deepening
and efficiency reduce environmental risk and can overturn the negative impact of FDI on the
environment. However, financial access worsens environmental risk especially at lower levels and
cannot make the FDI – environment nexus any better. But then again, high levels of financial
access has the ability to reduce environmental risk.
Also, after splitting the dataset into high and low financially developed economies, we report that
FDI is more environmentally depressive among low financially developed economies. Third, on
the effect of tax policies on the FDI-environmental risk nexus, the study finds support that the tax
channel is the main medium through which FDI worsens environmental risk. By discomposing tax
policy into low and high regimes, the study reports that countries that deliberately reform tax policy
to bait FDI have higher environmental risk. Therefore, using tax policy to lure FDI amount to
short-changing capital risk for environmental risk. Finally, We set up the Dynamic Stochastic
General Equilibrium (DSGE) model to estimate the effect of carbon tax adoption on FDI. The
findings from this exercise show that the direct effect of the carbon tax on FDI is repressive.
However, if the revenue from the carbon tax is recycled into the economy, the carbon tax will have
a significant positive effect on FDI. Hence, the study corroborates the double dividend theory. The
findings further suggest that a carbon tax of around US$8.5/ton is reasonable to enhance inward
FDI but a carbon tax either above US$25/ton or below US$3/ton will be detrimental to the African region. Also, the entrenched negative relationship between FDI and taxes is worsened if the
additional carbon tax is levied among high tax regime countries than their counterparts.
The findings of this thesis churn out several contributions to knowledge and literature. The African
context in the environmental economics and carbon tax policies are marginalized in the existing
literature. This study opens up the frontiers to the discussions on the implications of carbon tax
introduction on the free movement of international capital. As a forerunner on the subject of carbon
tax’s effect on FDI in both Africa and the globe, this study offers reasons why many countries
have not implemented a carbon tax despite the numerous benefits associated with it.
This study also leads the way in advancing that the finance and the tax channels are the yet-to-be explored factors that account for the impact of FDI on the environment. The existing literature
associates the negative effect of FDI on the environment with institutional quality. However,
institutional quality is broad and encompasses almost everything in the administration of a country.
This leaves policymakers helpless as the specific aspect of institutions that can mitigate the
harmful environmental effects of FDI. This thesis brings finality to this policy debacle and
recommends that retooling tax policies and enhancing financial deepening and efficiency could
improve the effect of FDI on the environment.
Keywords: environmental risk, foreign direct investment, financial sector development, carbon
tax, tax policies, and generalized method of moment.
PhD. Finance
2022-07-01T00:00:00ZCross-Border Banking And Depositor Market Discipline In AfricaMutala, H.Y.A.http://ugspace.ug.edu.gh:8080/handle/123456789/397632023-09-05T18:21:52Z2019-07-01T00:00:00ZCross-Border Banking And Depositor Market Discipline In Africa
Mutala, H.Y.A.
This thesis focuses on the effect of cross-border banks on bank risk and market discipline in the presence of explicit deposit insurance and depositor market discipline incentives using a dataset that covers many countries in Africa. Based on different estimation techniques, this thesis provides the following robust results. First, cross-border banks have better: asset quality, liquidity, and diversification mean scores than their domestic counterparts. Simultaneously, cross-border banks also experience higher overhead expenses, higher volatility in earnings, lower capital levels, higher market risk, and lower stability than domestic banks. These findings lend credence to both the diversification hypothesis and market risk hypothesis.
Second, cross-border banks operating in countries with explicit deposit insurance arrangements have higher loan loss provision (lower asset quality), a higher standard deviation of return on assets (higher variation in earnings), higher market risk (lower Sharpe ratio), and lower stability (lower Z-score). This study, therefore, reveals a benign form of regulatory arbitrage hypothesis within cross-border banks in Africa. Third, depositor market discipline via the priced based mechanism and the quantity-based mechanism exist in Africa. This evidence supports a complete test for depositor market discipline. This finding is based on robust evidence from the capital adequacy ratio and the ratio of corporate loans to total loans of cross-border banks. Fourth, the study finds that the capital level of cross-border banks serves as an incentive for depositors to monitor the risk of cross-border bank
Fifth, the study finds that when depositors monitor and discipline banks for excessive risk-taking, it is strong enough to influence banks to reduce their risk-taking levels among Good Banks. This last evidence supports a true form of test for depositor market discipline in Africa.
This study makes the following contributions to the literature: First, to gain new insights into the effect cross-border banking has on bank risk, it makes use of unexamined samples. The evidence the study provides on depositor market discipline within the cross-border banking context is also new in the literature. Lastly, the finding that the capital level of cross-border banks serves as an incentive for depositors to monitor cross-border bank risk, is also new in the literature.
This study has revealed the important role depositors can play in the monitoring and policing of cross-border bank risk. The Basel Committee on Banking Supervision and bank regulators should, therefore, take note and put in place structures that will enable depositors to have access to cross-border bank information such as capital level and corporate loan concentration level constantly.
PhD. Finance
2019-07-01T00:00:00ZCross-Border Banking and Depositor Market Discipline in AfricaMutala, H.Y.A.http://ugspace.ug.edu.gh:8080/handle/123456789/362352021-04-27T14:03:49Z2019-07-01T00:00:00ZCross-Border Banking and Depositor Market Discipline in Africa
Mutala, H.Y.A.
This thesis focuses on the effect of cross-border banks on bank risk and market discipline in the presence of explicit deposit insurance and depositor market discipline incentives using a dataset that covers many countries in Africa. Based on different estimation techniques, this thesis provides the following robust results. First, cross-border banks have better: asset quality, liquidity, and diversification mean scores than their domestic counterparts. Simultaneously, cross-border banks also experience higher overhead expenses, higher volatility in earnings, lower capital levels, higher market risk, and lower stability than domestic banks. These findings lend credence to both the diversification hypothesis and market risk hypothesis.
Second, cross-border banks operating in countries with explicit deposit insurance arrangements have higher loan loss provision (lower asset quality), a higher standard deviation of return on assets (higher variation in earnings), higher market risk (lower Sharpe ratio), and lower stability (lower Z-score). This study, therefore, reveals a benign form of regulatory arbitrage hypothesis within cross-border banks in Africa. Third, depositor market discipline via the priced based mechanism and the quantity-based mechanism exist in Africa. This evidence supports a complete test for depositor market discipline. This finding is based on robust evidence from the capital adequacy ratio and the ratio of corporate loans to total loans of cross-border banks. Fourth, the study finds that the capital level of cross-border banks serves as an incentive for depositors to monitor the risk of cross-border banks. Fifth, the study finds that when depositors monitor and discipline banks for excessive risk-taking, it is strong enough to influence banks to reduce their risk-taking levels among Good Banks. This last evidence supports a true form of test for depositor market discipline in Africa.
This study makes the following contributions to the literature: First, to gain new insights into the effect cross-border banking has on bank risk, it makes use of unexamined samples. The evidence the study provides on depositor market discipline within the cross-border banking context is also new in the literature. Lastly, the finding that the capital level of cross-border banks serves as an incentive for depositors to monitor cross-border bank risk, is also new in the literature.
This study has revealed the important role depositors can play in the monitoring and policing of cross-border bank risk. The Basel Committee on Banking Supervision and bank regulators should, therefore, take note and put in place structures that will enable depositors to have access to cross-border bank information such as capital level and corporate loan concentration level constantly.
PhD. Finance
2019-07-01T00:00:00Z