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AbstractIn this paper, we attempt to estimate the tax gap in the informal sector as well as the contributing factors of the tax losses in SSA countries using Ghana as a case study. Using micro data on non‐farm household enterprises obtained from the sixth round of the Ghana Living Standards Survey as well as data on quarterly tax payable by specified small scale enterprises derived from the Small Tax Payer office of the Ghana Revenue Authority, the findings show that the national potential and actual taxes in the informal sector are US$ 81 974 846 and US$ 25 023 273, respectively, reflecting an estimated national tax gap or loss of approximately US$ 56 951 573. Firm level variables such as type of business, urban location and experience of the firm significantly increase the propensity to pay tax and reduce the tax gap. Copyright © 2018 John Wiley & Sons, Ltd.

Ghana is again experiencing large and chronic fiscal deficits that many analysts attribute to a sharp increase in its the public-sector wage bill. This study uses macroeconomic and household survey data to examine public employment and public wages both historically and in comparison with private-sector wages. Although we do find a public-sector wage premium in the most recent data (for 2012/2013), it is not as large as one would expect from the macro data, totaling only 15 to 28 percent of the public-sector wage bill, or 2 to 3 percent of gross domestic product. That is far from enough to eliminate the government deficit. To make further reductions in the wage bill, policymakers must either make the normative case that public-sector workers should be paid less than private-sector workers with similar qualifications, something that will be difficult politically, or they must adjust the required skill levels of public-sector employees downward, something that may not make administrative sense. There is some low-hanging fruit in the public-sector wage bill, but not enough to resolve Ghana's fiscal crisis. ; Non-PR ; IFPRI1; DCA; CRP2; F Strengthening institutions and governance; F.2 Political Economy of Development Policy and Investment Processes; C Improving markets and trade; C.2 Institutions and Infrastructure for market development ; DSGD; PIM ; CGIAR Research Program on Policies, Institutions, and Markets (PIM)

Purpose
– This paper aims to investigate the influence of the central bank's regulatory capital on commercial banks specific performance outcomes such as credit supply, interest rate spread (as a measure of efficiency) and non-performing loans (NPLs).


Design/methodology/approach
– Using specific commercial bank-level panel data from 2002-2012, a system of equations was modeled that allows us to apply the system generalized methods of moment approach and estimate the equations, while controlling for specific bank level, industry and macroeconomic variables.


Findings
– The study finds a positive relationship between a net minimum capital ratio and the net interest margin. Although this is in contrast with the study expectations, the result suggests that a high net minimum capital requirement would widen the spread between the lending and saving rates. The study further finds evidence to support the fact that high minimum capital requirement and excess capital above the minimum required drive credit growth in the banking sector of Ghana. However, high excess capital increases risk-taking activities of the banks, as excess capital is found to be associated with high NPL ratios.


Practical implications
– Given the economic benefits and costs of sharply increasing bank regulatory capital, our results speak to the ongoing debates on the right level of capital, the effectiveness of the Bank of Ghana policy rate (PR) and the high lending rates that appear to respond only slowly to macroeconomic indicators such as the PR and the inflation rate. The finding also has practical implications for the adoption of the Basel III accord.


Originality/value
– The empirical literature has not paid enough attention to the impact of regulatory capital on the three specific bank-level outcomes – NPLs, interest rate spread and the nature of interrelationships among these variables, particularly in the African context.

PurposeThe study aims to investigate the factors that influence banks' loan supply in Sierra Leone. More specifically, it seeks to look into the effects of risk premium, leverage ratio and credit risk on banks' loan supply in Sierra Leone.Design/methodology/approachUsing annual bank level data on an unbalanced panel of 13 commercial banks data observed over a period of ten years (2002 to 2011), the study employs time and bank‐specific fixed effects model for estimation.FindingsThe findings indicate that risk premium, the share of non‐performing loans in the banks' loan portfolio, tier 1 capital ratio (leverage ratio) and local currency deposit levels positively and significantly affect the share of loan supply to the private sector in banks' earning assets. On the other hand, advances to local currency deposit ratio and bank size have significant negative effects on the share of loans in banks assets. The study also finds bank type and the growth rate of real GDP (a proxy for economic activity) to be important determinants of the share of loans in banks' earning assets.Practical implicationsThe study recommends that the monetary authorities, banking practitioners and the government should pay keen attention to the key risk factors such as non‐performing loans and risk premium in the operation of the banking sector to boost commercial banks' loan supply.Originality/valueSierra Leone's banking sector presents a unique opportunity to study bank loan supply in relation to bank‐specific features in the context of post‐war financial reconstruction.

Purpose
The purpose of this paper is to investigate the effect of corruption and institutional governance indicators on capital flight in Sub-Saharan Africa.


Design/methodology/approach
Using a Portfolio Choice Framework, the study employs two different estimation techniques as Generalized Method of Moment and Fixed Effect Regression on panel data sets of 32 countries in Sub-Saharan Africa over the period 2000-2012.


Findings
The variable of interest, corruption, retains its expected positive sign and statistically significant across all the estimations. The relationship remains very strong even when other equally important institutional variables such as regime durability, rule of law and independence of the executive are taken into account. This suggests that a higher perception of corruption among public authorities as in bribery, kickbacks in public procurement, embezzlement of public funds, among others facilitates an increase in capital outflow from SSA. The findings further indicate that regime durability and rule of law are important institutional variables that also significantly influence capital flights in SSA.


Practical implications
The findings imply that institutional reforms should be encouraged if SSA is to win the war against corruption and by extension against capital flight. There should be a creation of democratic environment and good governance practices that foster stronger governance institutions, decline in corruption and better domestic investment climate to help reverse the high spate of capital flight in the region.


Originality/value
The main value of this paper is using the portfolio choice framework to analyze the relationship between capital flight and corruption in the Sub-Saharan African context.

We use methods developed by the Commitment to Equity Institute to assess the effects of government taxation, social spending and indirect subsidies on poverty and inequality in Ghana. We also simulate several policy reforms to assess their distributional consequences. Results show that, although the country has some very progressive taxes and well-targeted expenditures, the extent of fiscal redistribution is small, but about what one would expect given Ghana's income level and relatively low initial inequality. Results for poverty reduction are less encouraging: were it not for the in-kind benefits from health and education spending, the overall effect of government spending and taxation would actually increase poverty in Ghana. Eliminating energy subsidies and at the same time reallocating part of the savings to well-targeted transfer programs could lower the fiscal deficit while reducing inequality and protecting the poor.

PurposeThe purpose of this paper is to investigate the determinants of financing preference of micro and small enterprises (MSEs) whilst distinguishing a broader range of financing sources beyond what is typically the case within the corporate finance literature.Design/methodology/approachUnder the framework of ordinal logistic regression, the paper also tests whether there is evidence of hierarchical preference ordering as predicted by pecking order theory (POH) using field survey data for 2009.FindingsThe authors relate that new enterprises are more likely to prefer low cost and less risky or less formal financing such as internal or bootstrap finances. However, as the enterprise gets established or matures, its capacity to seek formal financing increases, thereby becoming more likely to prefer or being in a higher category of formal financing. While the paper affirms the POH, it is argued that this order is a consequence of severe persistent constraints other than sheer preference. The findings further reveal that, microentrepreneur's and MSE's‐specific level socio‐economic characteristics such as owner's education or financial literacy status, households tangible assets, ownership structure, enterprise size, as well as sensitivity to high interest rates in the credit market, to be important determinants of either past (start‐up), present or future financing preference.Originality/valueThe main value of this paper is to analyse the determinants of financing preference of MSEs within the context of rural financial market (RFM) from a developing country perspective.