Working papers

Using a sample of publicly listed banks from 62 developed and developing, including MENA, countries over the 1991-2017 period, we investigate the impact of capital on banks’ cost of equity. We report the highest median cost of equity in Lebanon with 25.1%. Consistent with the theoretical prediction that more equity in the capital mix leads to a fall in firms’ costs of equity, we find that better capitalised banks enjoy lower equity costs. Our baseline estimations indicate that a 1 percentage point increase in a bank’s equity-to-assets ratio lowers its cost of equity by about 18 basis points. Our results also suggest that the form of capital that investors value the most is sheer equity capital; other forms of capital, such as Tier 2 regulatory capital, are less (or not at all) valued by investors. Additionally, our main finding that capital has a negative effect on banks’ cost of equity holds in both developed and developing countries. The results of this paper provide the missing evidence in the debate on the effects of higher capital requirements on banks’ funding costs.

The Economic Complexity (EC) approach (Hidalgo and Hausmann 2009) offers a path-breaking perspective into the study of economic development, by introducing new tools for economic analysis, such as the product space and sophistication indexes. A different strand of international economics literature has studied Global Value Chains (GVCs), highlighting their impact on countries the economic performance of countries. This paper jointly considers these two strands of literature by: i) providing a descriptive analysis on a set of selected chains through updated measures of the product space and of derived indexes; ii) proposing a new EC coherent GVC participation index; iii) applying the former contributions to the analysis of North African countries’ GVC performance. From the latter analysis, strong differences between Tunisia, Egypt and Morocco emerge, as far as both current participation and future perspectives are concerned. Overall, the paper, by merging the two strands of literature, for the first time to our knowledge, highlights interesting opportunities for further developments in this direction.

Global Value Chains (GVCs) have become the predominant structure in world trade flows. They allow the specialisation of firms in very specific tasks, thus offering easier access to international markets. Developing countries may benefit from this framework through many channels. We focus on Egypt, a country that has faced remarkable challenges in recent years. The analysis is based on the World Bank Enterprise Surveys. After descriptive statistics that evidence the superior performance of traders with respect to domestic firms, this paper investigates the specific relationship between GVC participation and firm productivity. We are interested in enquiring whether a learning mechanism for Egyptian GVC participants exists, in the aftermath of the revolution. We use the definition by Taglioni and Winkler (2016), that allows participants to be broken down into different groups and, hence, to investigate differential effects for these categories. By using a DiD-PSM procedure, we affirm that entering a GVC produces an increase in a firm’s productivity; moreover, the effect is heterogeneous amongst the different groups. In the empirical analysis, we compare the results with those obtained using the Multiple Imputation procedure, in order to partially solve the problem of missing data.