Studia Universitatis Vasile Goldiș Arad, Seria Științe Economice

Capital Adequacy and Credit Risk in Banking: The Moderating Role of Revenue Diversification

Rashid Mehmood — 2026-02-02

Capital regulatory requirements are one of the prominent mechanisms to control bank credit risk-taking behavior and subsequently achieve financial stability. The study aimed to evaluate the moderating role of revenue diversification in the relationship between capital adequacy and credit risk behavior of 102 listed South Asian banks. We collected data from DataStream covering the period from 2011 to 2022. The study employed a fixed effect panel data model, system GMM, a two-step system dynamic panel estimation technique, and the Sargan test to analyze study results, resolve potential endogeneity problems, effectively use short time period and long cross-section dataset, and achieve instrument validity, respectively. We conclude that South Asian banks face low levels of credit risk and the interaction of revenue diversification with the capital adequacy ratio significantly and negatively reduces credit risk. The findings implicate little adverse selection problem among South Asian banks and the need for expanding non-traditional income sources while fulfilling regulatory capital requirements.

Navigating Challenges: The Impact of External Factors on SME Profitability

Filloreta Kunoviku-Demiri — 2026-02-02

This study aims to examine the influence of some of the external environmental factors such as corruption (CO), tough competition (TC), informal economy (IE), law enforcement (LE), and tax evasion (TE) on the profitability of SMEs measured by the net profit of SMEs. To examine the influence of these factors, the study has adopted the quantitative approach to evaluate the data gathered through the online form from 336 respondents via a random selection sample. To achieve this objective, the data analysis was carried out by applying the multinomial regression model to evaluate the influence of external factors on the net profit according to the input of the managers or entrepreneurs. Econometric results revealed that CO and TC have a significant positive influence on the net profit of SMEs, whilst the IE has a negative influence. TE and LE showed surprising results as they did not provide a significant impact. Understanding factors that influence net profit can provide entrepreneurs with more insight into issues affecting the future of their business. Increased profitability offers greater opportunities for SMEs to become more competitive and pushes them toward growth and development. In terms of bringing new value and originality, the study provides new evidence through an econometric approach, which delivers answers through empirical evidence and will instigate constructive debate and discussion between researchers.

Unveiling the Nexus Between Central Bank Autonomy and Free Market Dynamics: A Structural Equation Modeling Approach

Unal Eryilmaz — 2026-02-02

The interaction between the independence of the Central Bank (CBI) and the principle of the open market plays a major role in shaping policy performance at the international level. The CBI ensures monetary stability by insulating central banks from political pressures, while open markets promote economic freedom and growth through regulatory efficiency and openness. This study aims to fill the gap in the existing literature by examining the combined effects of these factors on national policy outcomes. Using Structural Equation Modeling (SEM) estimated by second-order Confirmatory Factor Analysis (CFA), the study analyzes data from 143 countries including indicators for open markets such as trade freedom, investment freedom and financial freedom, as well as dimensions of CBI such as policy autonomy and legal frameworks. The results reveal that open market indicators, especially financial and investment freedom, significantly affect policy performance, often exceeding the direct effect of CBI. European countries with robust regulatory frameworks and open markets are ranked highly, highlighting the complementary nature of economic openness and institutional autonomy. Furthermore, the study finds that although central bank independence is crucial for economic stability, it does not by itself guarantee superior policy outcomes, especially in regions where economic freedoms are limited.

Public Health Expenditure and Maternal Mortality Rate in Sub-Saharan African Countries

Afamefuna A. Eze — 2026-02-02

The study looked at public health spending and maternal mortality in Sub-Saharan Africa (SSA). The specific objectives were to: investigate the impact of public health expenditure on maternal mortality in Sub-Saharan Africa; determine whether there is a disparity in the impact of public health expenditure on maternal mortality across four sub-regions of Sub-Saharan Africa; and determine the nature of the causal relationship between public health spending and maternal mortality in Sub-Saharan Africa. The study employed the Panel ARDL, the Panel Co-integration Test, and the Panel Granger Causality Test to achieve the objectives. According to the findings, an increase in public health investment corresponds to a decrease in maternal death rates in sub-Saharan Africa. The regional analysis shows that public health expenditure has a long-run significant and negative impact on maternal mortality rate in the Central and Western regions of sub-Saharan Africa countries. Whereas, results from Southern and Eastern regions showed a positive and insignificant impact of public health spending on maternal mortality rate in the long run. The study reveals a unidirectional relationship between public health expenditure and maternal mortality rate with causality running from public health expenditure to maternal mortality rate and no causality running from maternal mortality rate to public health expenditure in both the full SSA sample and in the South SSA sample. The result also revealed a bidirectional relationship between public health expenditure and maternal mortality rate in Central sub-Saharan Africa both in the short-run and the long-run while there was no evidence of causality in East and West sub-Saharan Africa. The study therefore recommends targeted healthcare spending and suggests that investments in public health, education, and economic development can effectively lower maternal mortality rates.

Unlocking the Potential of Public Spending on Sustainable Development: The Moderating Role of Governance Quality

Thi Lam Ho — 2026-02-02

This study explores the untapped potential of public spending in promoting sustainable development, with a particular focus on the moderating role of governance quality across 45 developing countries from 2002 to 2023. By employing the System Generalized Method of Moments (S-GMM) and robustness tests using the Method of Moment Quantile Regression (MMQR), the research highlights the significant positive effect of public expenditure on sustainable development outcomes. Furthermore, the study breaks new ground by illustrating how governance quality moderates this relationship, demonstrating that stronger governance frameworks contribute to higher levels of sustainable development. However, the analysis uncovers nuanced effects: in settings at very high levels of governance quality, the marginal returns of additional public spending diminish, suggesting that resource allocation is already optimized in such environments. These findings emphasize the critical role of governance quality in unlocking the full potential of public spending for sustainable development. The study provides original insights into how policymakers can strategically optimize public investment by aligning it with institutional improvements, thereby enhancing the sustainability of development efforts.