IDEAS home Printed from https://ideas.repec.org/a/eee/mulfin/v66y2022ics1042444x22000317.html
   My bibliography  Save this article

Ownership structure of oil revenues: Political institutions and financial markets in oil-producing countries

Author

Listed:
  • Mohammed, Jabir Ibrahim
  • Fiador, Vera Ogeh
  • Karimu, Amin
  • Abor, Joshua Yindenaba

Abstract

This study examines the impact of the ownership structure of oil revenues on financial markets and institutions, and the intermediating role of political institutions. Using the fixed-effects model and GMM for robustness, we analyse data from 82 oil-producing countries. We find several key results. Firstly, government ownership of oil revenues undermines the efficiency of financial institutions when the quality of political institutions is weak, but enhances their efficiency when political institutions are strong. Secondly, the impact of private ownership of oil revenues is negative on the depth of and access to financial institutions when the quality of political institutions is weak, but positive when political institutions are strong. We observe similar threshold effects for the depth of and access to financial markets in the subsample of developing countries. We conclude that oil-producing countries need solid political institutions to benefit from oil wealth and to boost financial development.

Suggested Citation

  • Mohammed, Jabir Ibrahim & Fiador, Vera Ogeh & Karimu, Amin & Abor, Joshua Yindenaba, 2022. "Ownership structure of oil revenues: Political institutions and financial markets in oil-producing countries," Journal of Multinational Financial Management, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:mulfin:v:66:y:2022:i:c:s1042444x22000317
    DOI: 10.1016/j.mulfin.2022.100760
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042444X22000317
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.mulfin.2022.100760?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael Ross, 2006. "Is Democracy Good for the Poor?," American Journal of Political Science, John Wiley & Sons, vol. 50(4), pages 860-874, October.
    2. Umar, Muhammad & Ji, Xiangfeng & Mirza, Nawazish & Rahat, Birjees, 2021. "The impact of resource curse on banking efficiency: Evidence from twelve oil producing countries," Resources Policy, Elsevier, vol. 72(C).
    3. Phuc Canh, Nguyen & Trung Thong, Nguyen, 2020. "Nexus between financialisation and natural resources rents: Empirical evidence in a global sample," Resources Policy, Elsevier, vol. 66(C).
    4. Dogan, Eyup & Madaleno, Mara & Altinoz, Buket, 2020. "Revisiting the nexus of financialization and natural resource abundance in resource-rich countries: New empirical evidence from nine indices of financial development," Resources Policy, Elsevier, vol. 69(C).
    5. Dwumfour, Richard Adjei & Ntow-Gyamfi, Matthew, 2018. "Natural resources, financial development and institutional quality in Africa: Is there a resource curse?," Resources Policy, Elsevier, vol. 59(C), pages 411-426.
    6. Mlachila, Montfort & Ouedraogo, Rasmané, 2020. "Financial development curse in resource-rich countries: The role of commodity price shocks," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 84-96.
    7. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law, endowments, and finance," Journal of Financial Economics, Elsevier, vol. 70(2), pages 137-181, November.
    8. Frederick van der Ploeg & Anthony J. Venables, 2011. "Harnessing Windfall Revenues: Optimal Policies for Resource‐Rich Developing Economies," Economic Journal, Royal Economic Society, vol. 121(551), pages 1-30, March.
    9. Mohammed, Jabir Ibrahim & Karimu, Amin & Fiador, Vera Ogeh & Abor, Joshua Yindenaba, 2020. "Oil revenues and economic growth in oil-producing countries: The role of domestic financial markets," Resources Policy, Elsevier, vol. 69(C).
    10. Nils Herger & Roland Hodler & Michael Lobsiger, 2008. "What Determines Financial Development? Culture, Institutions or Trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(3), pages 558-587, October.
    11. George Mavrotas & Syed Mansoob Murshed & Sebastian Torres, 2011. "Natural Resource Dependence and Economic Performance in the 1970–2000 Period," Review of Development Economics, Wiley Blackwell, vol. 15(1), pages 124-138, February.
    12. Bhattacharyya, Sambit, 2013. "Political origins of financial structure," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 979-994.
    13. Khanna, Arpita Asha, 2017. "Revisiting the Oil Curse: Does Ownership Matter?," World Development, Elsevier, vol. 99(C), pages 214-229.
    14. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    15. Atkinson, Giles & Hamilton, Kirk, 2003. "Savings, Growth and the Resource Curse Hypothesis," World Development, Elsevier, vol. 31(11), pages 1793-1807, November.
    16. Lof, Matthijs & Malinen, Tuomas, 2014. "Does sovereign debt weaken economic growth? A panel VAR analysis," Economics Letters, Elsevier, vol. 122(3), pages 403-407.
    17. Khan, Muhammad Atif & Gu, Lulu & Khan, Muhammad Asif & Oláh, Judit, 2020. "Natural resources and financial development: The role of institutional quality," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    18. Huang, Yongfu, 2010. "Political Institutions and Financial Development: An Empirical Study," World Development, Elsevier, vol. 38(12), pages 1667-1677, December.
    19. Eregha, P.B. & Mesagan, Ekundayo Peter, 2016. "Oil resource abundance, institutions and growth: Evidence from oil producing African countries," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 603-619.
    20. Bhattacharyya, Sambit & Hodler, Roland, 2014. "Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions," World Development, Elsevier, vol. 57(C), pages 101-113.
    21. Liaqat, Zara, 2019. "Does government debt crowd out capital formation? A dynamic approach using panel VAR," Economics Letters, Elsevier, vol. 178(C), pages 86-90.
    22. Kurronen, Sanna, 2015. "Financial sector in resource-dependent economies," Emerging Markets Review, Elsevier, vol. 23(C), pages 208-229.
    23. repec:imf:imfsdn:15/8 is not listed on IDEAS
    24. Asif, Muhammad & Khan, Khan Burhan & Anser, Muhammad Khalid & Nassani, Abdelmohsen A. & Abro, Muhammad Moinuddin Qazi & Zaman, Khalid, 2020. "Dynamic interaction between financial development and natural resources: Evaluating the ‘Resource curse’ hypothesis," Resources Policy, Elsevier, vol. 65(C).
    25. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    26. Kassouri, Yacouba & Altıntaş, Halil & Bilgili, Faik, 2020. "An investigation of the financial resource curse hypothesis in oil-exporting countries: The threshold effect of democratic accountability," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    27. Jiang, Chun & Zhang, Yadi & Kamran, Hafiz Waqas & Afshan, Sahar, 2021. "Understanding the dynamics of the resource curse and financial development in China? A novel evidence based on QARDL model," Resources Policy, Elsevier, vol. 72(C).
    28. Katsiaryna Svirydzenka, 2016. "Introducing a New Broad-based Index of Financial Development," IMF Working Papers 2016/005, International Monetary Fund.
    29. Ms. Ratna Sahay & Mr. Martin Cihak & Mr. Papa M N'Diaye & Mr. Adolfo Barajas & Ms. Diana B Ayala Pena & Ran Bi & Miss Yuan Gao & Ms. Annette J Kyobe & Lam Nguyen & Christian Saborowski & Katsiaryna Sv, 2015. "Rethinking Financial Deepening: Stability and Growth in Emerging Markets," IMF Staff Discussion Notes 2015/008, International Monetary Fund.
    30. Atsushi Iimi, 2007. "Escaping from the Resource Curse: Evidence from Botswana and the Rest of the World," IMF Staff Papers, Palgrave Macmillan, vol. 54(4), pages 663-699, November.
    31. Adams, Dawda & Ullah, Subhan & Akhtar, Pervaiz & Adams, Kweku & Saidi, Samir, 2019. "The role of country-level institutional factors in escaping the natural resource curse: Insights from Ghana," Resources Policy, Elsevier, vol. 61(C), pages 433-440.
    32. Ratna Sahay & Martin Cihak & Papa M N'Diaye & Adolfo Barajas & Diana B Ayala Pena & Ran Bi & Yuan Gao & Annette J Kyobe & Lam Nguyen & Christian Saborowski & Katsiaryna Svirydzenka & Seyed Reza Yousef, 2015. "Rethinking Financial Deepening; Stability and Growth in Emerging Markets," IMF Staff Discussion Notes 15/08, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ali, Adnan & Ramakrishnan, Suresh & Faisal, Faisal & Ghazi H Sulimany, Hamid & Bazhair, Ayman Hassan, 2022. "Stock market resource curse: The moderating role of institutional quality," Resources Policy, Elsevier, vol. 78(C).
    2. Ali, Adnan & Ramakrishnan, Suresh & Faisal,, 2022. "Financial development and natural resources. Is there a stock market resource curse?," Resources Policy, Elsevier, vol. 75(C).
    3. Dwumfour, Richard Adjei & Ntow-Gyamfi, Matthew, 2018. "Natural resources, financial development and institutional quality in Africa: Is there a resource curse?," Resources Policy, Elsevier, vol. 59(C), pages 411-426.
    4. Khan, Muhammad Atif & Gu, Lulu & Khan, Muhammad Asif & Oláh, Judit, 2020. "Natural resources and financial development: The role of institutional quality," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    5. Alssadek, Marwan & Benhin, James, 2023. "Natural resource curse: A literature survey and comparative assessment of regional groupings of oil-rich countries," Resources Policy, Elsevier, vol. 84(C).
    6. Adabor, Opoku, 2023. "The effect of financial development on natural gas resource rent in Ghana," Resources Policy, Elsevier, vol. 83(C).
    7. Muhammad Atif Khan & Muhammad Asif Khan & Kishwar Ali & József Popp & Judit Oláh, 2020. "Natural Resource Rent and Finance: The Moderation Role of Institutions," Sustainability, MDPI, vol. 12(9), pages 1-23, May.
    8. He, Jiao & Deng, Zhenghua, 2023. "Revisiting natural resources rents and sustainable financial development: Evaluating the role of mineral and forest for global data," Resources Policy, Elsevier, vol. 80(C).
    9. Faryal, & Faisal, Faisal & Amin, Muhammad Yusuf & Haq, Zahoor Ul & Rahman, Sami Ur & Ali, Adnan, 2023. "Natural resources revenues, shadow economy and financial institutions depth: The way forward," Resources Policy, Elsevier, vol. 85(PB).
    10. Badeeb, Ramez Abubakr & Lean, Hooi Hooi & Clark, Jeremy, 2017. "The evolution of the natural resource curse thesis: A critical literature survey," Resources Policy, Elsevier, vol. 51(C), pages 123-134.
    11. Hasanov, Fakhri J. & Aliyev, Ruslan & Taskin, Dilvin & Suleymanov, Elchin, 2023. "Oil rents and non-oil economic growth in CIS oil exporters. The role of financial development," Resources Policy, Elsevier, vol. 82(C).
    12. Aliya Zhakanova Isiksal, 2023. "The role of natural resources in financial expansion: evidence from Central Asia," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-21, December.
    13. Li, Zongyun & Rizvi, Syed Kumail Abbas & Rubbaniy, Ghulame & Umar, Muhammad, 2021. "Understanding the dynamics of resource curse in G7 countries: The role of natural resource rents and the three facets of financial development," Resources Policy, Elsevier, vol. 73(C).
    14. Hadj, Tarek Bel & Ghodbane, Adel, 2021. "Do natural resources rents and institutional development matter for financial development under quantile regression approach?," Resources Policy, Elsevier, vol. 73(C).
    15. Ding, Yuanyi, 2023. "Does natural resources cause sustainable financial development or resources curse? Evidence from group of seven economies," Resources Policy, Elsevier, vol. 81(C).
    16. Bhattacharyya, Sambit & Hodler, Roland, 2014. "Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions," World Development, Elsevier, vol. 57(C), pages 101-113.
    17. Jiang, Chun & Zhang, Yadi & Kamran, Hafiz Waqas & Afshan, Sahar, 2021. "Understanding the dynamics of the resource curse and financial development in China? A novel evidence based on QARDL model," Resources Policy, Elsevier, vol. 72(C).
    18. Tang, Chang & Irfan, Muhammad & Razzaq, Asif & Dagar, Vishal, 2022. "Natural resources and financial development: Role of business regulations in testing the resource-curse hypothesis in ASEAN countries," Resources Policy, Elsevier, vol. 76(C).
    19. Gokmenoglu, Korhan K. & Rustamov, Bezhan, 2022. "The role of the natural resource abundance in the short and long run: The case of the Kingdom of Saudi Arabia," Resources Policy, Elsevier, vol. 77(C).
    20. Dogan, Eyup & Madaleno, Mara & Altinoz, Buket, 2020. "Revisiting the nexus of financialization and natural resource abundance in resource-rich countries: New empirical evidence from nine indices of financial development," Resources Policy, Elsevier, vol. 69(C).

    More about this item

    Keywords

    Ownership structure; Government oil revenues; Private oil revenues; Political institutions; Financial institutions and markets; International oil companies;
    All these keywords.

    JEL classification:

    • N2 - Economic History - - Financial Markets and Institutions
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:mulfin:v:66:y:2022:i:c:s1042444x22000317. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/mulfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.