1. Samuel Lovemore Makacha
Business Studies Honors Degree in Finance and
Banking
An assessment of financial internationalization by Zimbabwean firms since 2009

2. i
Abstract
The purpose of this study was to examine the extent to which Zimbabwean firms have been
involved in financial internationalisation since the dollarization of the Zimbabwean economy in
2009, the drivers thereof as well as its benefits and challenges. Therefore, the study adopted a
survey research strategy using a questionnaire as the research instrument. In a bid to determine
the extent to which Zimbabwean firms are involved in financial internationalisation since 2009,
presence of foreign shareholders, foreign debt and investments abroad were used as indicators of
financial internationalisation. On this basis, it can therefore be concluded that Zimbabwean firms
are not significantly engaged into financial internationalisation. This has been facilitated by a
number of challenges that are acting as deterrents to financial internationalisation, the prime ones
being lack of managerial resources and poor appreciation of the concept by key stakeholders.
However, the restrictions on local financial market and the need to keep track with financial
globalisation has been identified as the key drivers to financial internationalisation by firms
already engaged in financial internationalisation.

3. i
Acknowledgements
My gratitude goes to my supervisor, Mr. J.P Sai for his invaluable expertise, dedication and
timely guidance towards the success of this research.
I would also want to express my gratitude to Daramachi Bryan, Hwizah Tawanda, Matiki
Precious, Kamanura Memory, Beaulla Kandori, Tinei Mwanza, Luckmore Chirimanyemba,
Takudzwa Mlambo, and Owen Munotsva for their great assistance in questionnaire
adminstaration and literature review.

4. i
Table Contents
Abstract.........................................................................................................................................................i
Acknowledgements ..................................................................................................................................i
1. INTRODUCTION...................................................................................................................................1
1.1 Background .......................................................................................................................................1
1.2 Statement of the Problem.................................................................................................................2
1.3 Research Objectives..........................................................................................................................2
1.4 Research Questions...........................................................................................................................2
1.5 Statement of Hypothesis...................................................................................................................2
1.6 Research Scope..................................................................................................................................3
1.7 Research Significance .......................................................................................................................3
1.8 Chapter summary.............................................................................................................................3
2. LITERATURE REVIEW ......................................................................................................................4
2.0 Introduction.......................................................................................................................................4
2.1 Theoretical literature Review ..........................................................................................................4
2.1.1 Infrastructures Links across Borders ......................................................................................4
2.1.2 Internationalization Models......................................................................................................5
2.2 Empirical Literature Review ...........................................................................................................6
2.3 Chapter summary...........................................................................................................................10
3. METHODOLOGY ...............................................................................................................................11
3.0 Introduction.....................................................................................................................................11
3.1 Research approach..........................................................................................................................11
3.2 Research strategy............................................................................................................................11
3.3 Population........................................................................................................................................11
3.4 Sampling ..........................................................................................................................................11
3.5 Scales of Measurement ...................................................................................................................12
3.6 Data collection and Analysis ..........................................................................................................12
3.7 Reliability and Validity...................................................................................................................12
3.8 Chapter summary...........................................................................................................................13
4. DATA ANALYSIS AND PRESENTATION......................................................................................14
4.0 Introduction.....................................................................................................................................14
4.1 Response Rate..................................................................................................................................14
4.2 Reliability Test ................................................................................................................................14

5. ii
4.3 Univariate Analysis.........................................................................................................................14
4.4 Drivers for Financial Internationalization ...................................................................................18
4.5 Challenges with Financial Internationalization ...........................................................................18
4.6 Benefits of Financial Internationalization ....................................................................................19
4.7 Chapter summary...........................................................................................................................20
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS.......................................................21
5.0 Introduction.....................................................................................................................................21
5.1 Summary..........................................................................................................................................21
5.2 Conclusion .......................................................................................................................................21
5.3 Recommendations...........................................................................................................................22
5.3.1 Revision of Financial market regulations ..............................................................................22
5.3.2 Financial Education.................................................................................................................22
5.4 Suggestions for further study.........................................................................................................22
REFERENCES..........................................................................................................................................23

6. 1
1. INTRODUCTION
Internationalization is a process of increasing involvement in international markets and it is also
a matter of being aware of the factors influencing international transactions or conducting
transactions with another country (Dhanaraj, 2003). However, according to Sai (2016), financial
internationalization refers to taking the financial management activities to international or global
market whose key players are foreign bank market, foreign bond markets and foreign equity
markets. On that respect, institutions such as the Zimbabwe Trade, Zimbabwe Investment
Authority and Trade Missions have been created to promote international trade and in particular,
foreign direct investments (FDIs) and develop exports. According to Levi (2005) financial
internationalization is largely driven by factors such as the information flows that underpin
market activity, common standards that guide the production and use of information and thirdly
by the infrastructure that allows market participants to act upon this information. Unless the
government of Zimbabwe and trade associations device means to cushion the firms financially,
and expose them to the international process the number of firms doing business internationally
will continue to decrease (Dhanaraj, 2003). This research therefore, endeavors to examine the
extent to which Zimbabwean firms are involved in financial internationalization, the drivers
thereof as well as the respective challenges in financial internationalization.
1.1 Background
Currently, the Zimbabwean economy experiencing suboptimal growth, a reflection of the multi-
layered challenges confronting the economy, principally liquidity problems, capitalization and
working capital shortages, recurrent power outages, uncertainty and generalized low business
confidence. In 2015, the annual growth of the Zimbabwean economy was revised down to 3.2%
as the economy persist suffering from a deflation (Bloomberg, 2015; African Development
Banking Group, 2015). The need to restore productive capacities, infrastructure rehabilitation
and improvement, investment in new technologies, diversification of economic growth sources
and key institutional and non-institutional reforms, lays the foundation necessary for the
recovery of the Zimbabwean economy. One sector hard hit by this economic mayhem is
arguably the financial services sector. Principal of the reasons has been capital erosion due to
losses and insider lending, reluctance by existing shareholders to be diluted by new investors
wishing to inject capital, recapitalization initiatives taking long to be concluded, high levels of
non-performing loans and lack of critical mass in terms of revenue to cover high operating
expenses.
The financial services sector plays a critical intermediary role of ensuring that funds are
transferred from one place to another in line with international best practices and a sound market
liquidity position promotes productivity since companies can access long term funding from
banks at affordable rates. This confirms that the financial sector is the bedrock for economic
development by virtue of it being a conduit for payment of economic transactions.

7. 2
Zimbabwe remains at the bottom of the factors that affect investor confidence. This defeats any
attempt to increase FDI. If the image of the country remains bleak a largely illiquid economy
will persist. Zimbabwe‟s key indicators on corruption, governance, political stability and rule of
law are severely unfavorable in comparison to neighboring economies thus exacerbating its
viable participation in the global financial markets.
Post multicurrency regime, that is, from 2009 to date, Zimbabwe can hardly make effective use
of its monetary policy to inject more liquidity and capital into the economy. However, exposing
the Zimbabwean firms to in international financial markets may go considerable yardsticks in
promoting local financial market competitiveness as well as revamping the slumbering financial-
economic situation in the country.
1.2 Statement of the Problem
The failure by local Zimbabwean firms to go abroad and to participate in international
transactions and markets has constructed a myriad of drawbacks within the local market. Cateora
(2010) believes that internationalization of SMEs will relieve them from the „small market
effect‟ thus generating income for the local market from international markets. Amongst some of
the problems of poor or inadequate financial internationalization by Zimbabwean firms are low
contribution to the national output (GDP), high unemployment levels, capacity underutilization
and unprecedented poverty, to just mention a few. In addition, internationalization obviously
cannot go without companies facing risks such as political, legal and economic instabilities in
different countries. This study will drill down on the extent to which Zimbabwean firms have
been involved in the international financial market and the respective drivers to as well as the
challenges and benefits thereof.
1.3 Research Objectives
 To determine the extent to which Zimbabwean firms are involved in financial
internationalization.
 To identify drivers of financial internationalization by Zimbabwean firms.
 To identify challenges being faced by Zimbabwean firms in financial internationalization.
 To identify benefits associated with financial internationalization.
1.4 Research Questions
 To what extent are Zimbabwean firms involved in financial internationalization?
 What are the drivers of financial internationalization by Zimbabwean firms?
 What are the challenges faced by Zimbabwean firms in financial internationalization?
 What the benefits that accrues from financial internationalization?
1.5 Statement of Hypothesis
H1 Zimbabwean firms are significantly engaged in financial internationalization
H2: A firm‟s size conditions the possibility and extent of its international financial activity.

8. 3
H3: The industry in which a firm operates conditions the extent of its international financial
activity
H4: The technological intensity of an industry in which a firm operates conditions the extent of
its international financial activity
H5 Commercial internationalization (i.e. involvement in exportation) conditions financial
internationalization
1.6 Research Scope
The research is limited to analysing the extent to which Zimbabwean firms are involved in
financial internationalization, the drivers thereof as well as the challenges and benefits in the
financial internationalisation arena.
1.7 Research Significance
Financial Internationalization is a broad topic and a complex phenomenon which affects almost
every business entity in any given economy, thus the importance of this research cannot be
undervalued. Since every firm is affected either directly or indirectly by financial
internationalization it is therefore imperative to highlight the significance of this research. The
importance of this research is to increase the knowledge in the field of financial
internationalization by local Zimbabwean corporations through an investigation, description and
analysis on why firms should internationalize their financial management activities. In addition,
the research is also significant in that it helps Zimbabwean firms to come up with competitive
strategies to survive within the increasingly competitive global business setup. Finally, the
research will definitely be of value to the academia hence acting as a benchmark for researchers
who are interested in the area to extend it further especially in the context of Sub-Saharan Africa.
1.8 Chapter summary
The investigation of financial internationalization by Zimbabwean firms is paramount as it may
provide a green light to the rescue of Zimbabwe‟s financial crisis. It is therefore on this basis that
the researchers sought to examine the extent to which Zimbabwean firms are exposed to
financial internationalization. This chapter acts as a basis to give the background, statement of
the problem, objectives, statement of hypothesis as well as the significance of conducting this
study.

9. 4
2. LITERATURE REVIEW
2.0 Introduction
This chapter provides a theoretical and empirical foundation to our study by presenting relevant
literature. This chapter begins by presenting a theoretical review of literature and then concludes
by the empirical literature review.
2.1 Theoretical literature Review
The quality and quantity of information open to market members and spectators have increased
significantly over recent decades. Timely and exact information that is material to financial
specialists'(investors) decisions is a paramount condition for the proper identification and
estimating of risk. In line with this, the explosion in the accessibility of information has
extraordinarily upgraded market discipline and, by extension, the incorporation of financial
activity crosswise over both markets and borders (Siddaiah, 2010).
Siddaiah (2010) also argued that the advancement in communication and computing technology
has been at the focal point of this explosion. Investors now have ready access to detailed
information on essentials, valuations and prices. Besides, this information can be analyzed, kept
and appropriated around the world more rapidly and more efficiently than ever before. Thus,
physical location is no longer an imperative determinant of investors‟ access to information.
The cross-listing of equity securities on international stock exchanges has likewise helped the
accessibility of information. The quantity of organizations which have listed across international
stock exchanges has expanded fourfold in the course of recent years. Das (2003) is of the
notation that firms are attracted to the major financial centers by the chance to raise capital at a
lower expense. Firms which cross-list possibly subject themselves to more demanding disclosure
and governance regimes, which improves transparency and accountability (Das, 2003). Through
a demonstration effect, it might likewise bring reporting measures up in the domestic market.
2.1.1 Infrastructures Links across Borders
This conveys to the infrastructure and institutions that empower market participants to act up on
the information accessible to them, and to associate with each other. Key components
incorporate modern contract law and efficient law enforcement procedures, market regulation,
and efficient payment and settlement frameworks (Siddaiah, 2010). Keeping up the local
infrastructure in good working order is a huge challenge for any policy authority. Connecting
infrastructure across borders is a considerably all the more overwhelming challenge.
Clark (2002) is on the notion that promoting interconnectedness does not as a matter of course
mean standardizing infrastructures across the borders. Now and again, a global solution might be
the most fitting. For instance, in the foreign exchange market the major dealers chose to set up
the CLS Bank to reduce foreign exchange settlement risk. But there might well be good reasons
to retain the idiosyncratic features of local infrastructures too. After all, rivalry among trading,
clearing and settlement frameworks can decrease transaction costs. That being said, in numerous
local markets the evacuation of what might appear to be little hindrances to financial activity can
go far towards furthering regional or global integration. In a nutshell, cross border information

10. 5
flows, common international standards and the linking of infrastructures across borders are three
main factors driving the process of financial internationalization.
2.1.2 Internationalization Models
There are four main models regarding the internationalization of firms: The Uppsala
Internationalization Model, The Transaction Cost Analysis Model, The Eclectic Model and the
Resource Based View Model.
2.1.2.1 Uppsala Model or Internationalisation Process Model
The Uppsala Model is of the assertition that firms increase their commitment in a foreign market
in gradual sequential steps as market knowledge increases and uncertainty surrounding the
foreign market decreases (Johanson & Vahlne, 2001). The sequence of entry is witnessed
through a firm initially using agents to market and distribute its product. Johanson & Vahlne
(2001) and Erramilli (1991) argue that the experience factor forces firms to choose markets that
are culturally similar to their home market. When companies‟ international experience increases,
and they are able to estimate the risks and returns correctly, and understand the complexities of
managing foreign operations, they become bolder in entering markets that are dissimilar. This
boldness encompasses to increasing their commitment to resources and increasing their control
of international operations.
2.1.2.2 Transaction Cost Analysis (Internalisation Theory)
Anderson & Gatignon (1986) put forward a model based on Transaction Cost Analysis (TCA) to
explain why a firm would own and operate a production facility in a foreign market instead of
using licensing or supply agreements with local businesses already established in the foreign
market (Ekeledo & Sivakumar, 2004). This model combines elements of contract law, industrial
organization and organizational theory.
2.1.2.3 Resource Based View (RBV)
The RBV model asserts that firms possess resources and capabilities that are heterogeneous and
imperfectly immobile and that these differences lead to strategic competitive advantage (Barney,
1991). The RBV theory views the firm, not the industry, as the source of competitive advantage
(Ekeledo & Sivakumar, 2004). The RBV of an organization holds that an organization‟s
resources and capabilities are more important than the structure of the industry in the
organization‟s attempt to gain competitive advantage. Firms hunt for exploiting their rare,
valuable and inimitable resources (skills and assets) in an attempt to gain competitive advantage
in the marketplace and thereby earn an above-normal rate of return (Barney, 1991; Tallman,
1991).
2.1.2.4 Eclectic Theory (OLI)
Dunning (1988) developed the eclectic paradigm, which also became known as the Ownership,
Location, Internalization (OLI) model. Dunning (1988 ) described the Eclectic Model as
“drawing on several strands of economic theory in order to provide a framework by which it was
possible to identify and evaluate the significant factors influencing both the initial act of foreign

11. 6
production as well as the growth of such production”. The OLI eclectic framework consists of
three distinct sets of variables - ownership, location and internalization - that firms will draw
upon when selecting their entry mode. Ownership advantages are concerned with asset power,
the degree of control and the management of risks that firms need to consider when making
foreign investment decisions. Dunning (1988) argues that the size of the firm positively
influences the entry mode. Larger firms with larger resources are able to absorb the initial cost of
internationalization and will opt for a higher degree of control such as being wholly owned rather
than developing partnerships. However, Agarwal &Ramaswami (1992) found that firms without
international experience will have difficulty managing the problems associated with foreign
operations. These firms will overstate the risks associated with a foreign market and understate
the returns, thereby making the choice of a lower degree of control or non-entry more probable.
2.2 Empirical Literature Review
Financial internationalisation is actually a huge and multidimensional undertaking such that any
research conducted should come up with different viewpoints and conclusion. Rymarczyk (2010)
suggests that the various approaches on internationalisation may be grouped into institutional
trends, processual trends and behaviouristic trends. However, Mejri and Umemoto (2010) assert
that research on internationalisation was mainly done in the framework of theories of economics
at both macro-level and micro-level on behavioural economics basis. Contemporaries theories
such as network theory and knowledge based emerged to explain and examine financial
internationalisation.
Bielawska (2001) argues that on doing research into Small and Medium Enterprises it is
imperative to adopt internationalisation phenomenon measures and a vital question on the extent
of company‟s foreign involvement which may be termed financial internationalisation. The
researchers found no explicit answers to the question of country‟s internationalisation
involvement. A number of financial internationalisation criteria and measures were nevertheless
determined. The quantitative measures included the firm‟s percentage of foreign turnover to total
turnover, the proportion of employees employed in import/export activities and total number of
employees, and the ratio between profits from foreign operations and total profits (Bielawska,
2001).
According to Manolova, Brush, Elelman and Greene (2002), financial internationalisation takes
various forms: export, import, Foreign Direct Investment (FDI), single and joint venture
investments, franchising and contracting. For instance, Chelliah, Sulaiman, Yusoff (2010)
carried out a research on firm‟s financial internationalisation in Malaysia. The indicators used
include earnings from international investments, proportion of Board of Directors members who
are foreigners. Another research carried done by Abdul-Talib (2011) focused on firm‟s export as
the only measure of the financial internationalisation. However, various indices were proposed
and used for measuring exports and, therefore, it was difficult to arrive at a dominant concept.
Some developing countries have deregulated their domestic markets long way back. Levine
(1997) studies the link between liberalisation of financial markets and economic development in

12. 7
Asia and finds that financial market liberalisation is the main contributor in economic
development. However, the financial market liberalisation has to be sequenced and managed
carefully. The researcher also establishes that financial institutions can be disciplined through
making information to be available, disclosure rules and imposing standards for bank
governance.
Asia and many other countries have loose international capital movements controls recently.
According to Dooley (1996), the relaxation of capital movements controls can result in greater
diversification of risk and lower capital costs. Nevertheless, the financial system has to be of
high quality in matter of supervision. Honohan (1997) argues that financial distress is
experienced by countries with weak financial systems.
Claessens and Glaessner (1998) states that the conduct of monetary policy and management of
exchange rate may be impacted by financial internationalisation. For example, MNCs may
introduce strange financial instruments, which may adversely affect money demand and money
management in countries that heavily rely on familiar monetary policy instruments. Foreign
banks can move capital across the borders and their presence make funds movements by
individuals and firms easily.
World Trade Organisation (1997) did a research on the nature of relationships between financial
internationalisation, deregulation, liberalisation of capital account and monetary policy. The
conclusion of the research is that the relationships are complex. Currently, a definite theoretical
framework and conceptual model for analysing the effect of these issues is missing and limited
empirical evidence is available.
An extensive research on the applicability of the comparative advantage theory and factual
evidence on the benefits of opportunities developed for goods trading to services trade was done.
The overall conclusion of this research is that comparative advantage theory in goods trading
conclusions apply for trade in services (Hindley, 1996). Thus, services internationalisation has
potential advantages for developing countries. Yet modification is required in analysis of
differences between services and goods.
Moen (2002) undertook a research to determine the type of organisations and industry that are
heavily involved in financial internationalisation. The findings were that the dominant exporting
companies that have recently emerged are infant companies, „born globals,‟ that is, companies
internalised within a duration of three years after establishment. It was further discovered that
these entities reach a level of outstanding global corporations that have gradually developed.
Additionally, Andrew (1999) carried out a research on companies that operate globally upon
starting up, and found out that it is easier for highly digitalised corporations to operate
internationally. The focus of the study was to identify the features of the firms that operate
globally immediately after establishment.

13. 8
So many researches were done in Europe (Moen, 2002), United States (Li, Li, Shi, 2011) and
Australia (Mort, Weerawardena, Liesch, 2012). The researchers‟ interests were to determine the
impact of innovation, management behaviours, entrepreneurial orientation and company
resources base on the growth of financial internationalisation as well as the performance of the
company. The performance of the companies operating internationally may be ascertained by
several means such as market share and new markets opened. Furthermore, company
performance may be measured strategically, that is, the strategic position and advantage relative
to competitors ((Zhang, Tansuhaj, McCullough, 2009).
Empirical evidence on the advantages of financial internationalisation is also obtainable in
Ireland, Portugal and Argentina (Honohan, 1997) and European Union (Nicholl, 1997). These
researches focused on the reaction to liberalisation, strategic implications and practical
considerations (in relation to monetary policies and money and capital markets developments)
and the benefits of international financial operations. The results were that financial
internationalisation improves the performance (profitability) and standards of local firms, and
athat efficient and better services accrue in open financial systems. The beneficial effects
appeared to be realised at a low rate. For example, in Argentina the ratio of costs to total assets
decreased from 1.3% I 1990 to 0.5% in April 1997, whereas the proportion of total assets held by
foreign banks increased from 15% to 22% (Arriazu, 1997).
Moreover, according to the study by Buch, Koch and Koetter (2010) on the benefits from
internationalizing German banks, it was found out that banks with higher shares of cross-border
assets either held directly by their domestic headquarters or by foreign branches realized higher
domestic market power. However, it was also noted that banks that maintain a foreign presence
in a large number of foreign countries are more likely to reveal above-average probabilities of
distress. The reason being that maintaining a large international banking network is costly.
Ultimately, it was also found that banks which differ in terms of size and banks from different
banking group do not have uniform benefits from internationalization. Commercial and savings
banks were found to improve their risk-return trade-off whilst cooperative banks tended to
worsen their risk-return trade-off.
In essence, it can be asserted that the benefits ensuing from internationalization in terms of
increasing margins and reduced risk are rather small (Buch, Koch and Koetter, 2010). The
marginal effects of going abroad are relatively small compared to the domestic determinants of
market power, and this is true even for those banks that can achieve higher levels of market
power through internationalization. At the same time, and in contrast to conventional wisdom,
internationalization has a rather limited impact on bank distress.
The effects of financial deregulation of in the US was also investigated (Jayaratne and Strahan
1996). Before the deregulation of financial operation, US banks had been subjected to severe
entry barriers emanating from branch restrictions. The banks were also regulated across national
or state lines and county lines. Jayaratne and Strahan (1996) study the effects of lifting bank

14. 9
restrictions on bank expansion and branching. They concluded that financial deregulation brings
more competitive interbank markets and better discipline bank managers.
Besides the above, the effects of financial internationalisation, liberalisation of capital account
and monetary policy has been considered. According to Nicholl, (1997), New Zealand financial
system is largely in the foreigners hands, but without unfavourable results on monetary policy
and capital flows. Foreign owned corporations were found to be committed to local market
growth. It was also found that access to financial services improved when there is a level of
playing field.
Fukao and Hanazaki (1986) in their study on internationalization of financial markets found out
that internationalization of financial markets exerts significant effects on the efficacy of the
macroeconomic policy. If domestic real interest rates are affected more by development of world
real interest rates, then the efficacy of domestic monetary policy to influence domestic private
investment is reduced. Furthermore, the impact of fiscal policy may also change. This is because
the more closely linked are financial markets, the stronger the exchange rate crowding out effect
becomes and the weaker becomes the interest rate crowding out effect. Ibid.
Moreover, Fukao and Hanazaki (1986) found out that internationalization of financial markets
tends to improve international capital movements which in turn improve the allocation of
resources. However, the different corporate and personal tax system of each country will result in
differences in cost of capital across countries even if the market real rate of interest may be
equalized across countries. Ibid.
In the research by Wengel (1995) on the trade flows in banking services for 141 countries using
data on approximately 3600 banks that operate internationally, it was discovered that relaxation
of capital controls and exchange controls by (potential) host countries decreases banks incentives
to seek direct representation. This acknowledges the links between the capital account
liberalisation and financial internationalisation.
The argument that financial internationalisation will result in substantial capital outflows
motivated some people to research into it. Schineller (1997) identifies the causes underlying
capital flight and finds that they include inconsistent and poor policies, political uncertainty and
unstable taxes. Thus dollarization and disintermediation is mainly a function of domestic
financial restriction than the liberalisation of the capital account.
Several questions on potential risks and costs of foreign entry have been considered in the
literature relative to internationalisation. White (1996) finds that internationalisation exerts
pressure for regulation adjustment in host countries. For example, host countries may only allow
establishment of business in the market when they are assured that the home country regulatory
authorities properly supervise their financial service providers.
Claessens, Klingebiel and Schmukler (2006) found out that internationalization process may
affect domestic stock market development adversely if too little activity remains at home thus

15. 10
exhibiting a potential vicious cycle. With liquidity concentrating in one market, a process of
improved fundamentals and increased internationalization may have negative spillover effects on
domestic markets which results in providing international markets with a greater advantage. It is
also of paramount importance to note that large-scale internationalization may thus make it more
difficult to sustain fully fledged local stock exchanges. However, this may not be a concern for
the larger corporations that are likely to be driving the process of internationalization in any case.
On the other hand many medium-sized firms may not be able to go directly overseas and may
find it difficult to obtain equity financing when domestic markets shrink. This occurrence would
have major consequences for such firms (Ibid).
2.3 Chapter summary
This chapter expounded the theoretical and empirical literature on financial internationalization.
Both theoretical and empirical literature proves that financial internationalization has a number
of drivers such as the globalization of financial activities, and it comes with it a number of
benefits such as improved market power notwithstanding the inherent challenges thereof.

16. 11
3. METHODOLOGY
3.0 Introduction
This chapter is composed of the research approach, strategy, population and sampling as well as
data collection and analysis methods employed for this study. The chapter concludes by giving
the reliability and validity of the study.
3.1 Research approach
The chosen approach for this study is the deductive research approach. This implies that the
research had to develop hypothesis and come up with a design aimed at testing this hypothesis
(Saunders et al., 2007). Our model is therefore derived from empirical findings of the research
(i.e. facts and relationships from this research).
3.2 Research strategy
The study made use of a survey research strategy. As recommended by Saunders et al.(2007),
this works well with deductive approach adopted for this study. Surveys provides an invaluable
advantage in research in that they allow for collection of volumes of data from a large population
in a highly economical way. This implies the use of structured closed questionnaire in order to
provide easy comprehensiveness and understandability of obtained data. The other rational to
using the survey strategy is that, it allows realistic generalisation of the research findings. Ibid.
3.3 Population
The study population is constituted of all registered companies across sectors in Zimbabwe
regardless of location in Zimbabwe, however, most of which are headquartered in Harare. With
Harare becoming the anchor of the economic ship of Zimbabwe (University of Zimbabwe
Industrial Attachment Companies Database, 2016), it appeared reasonable to consider mainly
Harare domiciled firms.
3.4 Sampling
The sample was developed using random sampling technique which gave every company an
equal chance of being selected for this study. The sample composition was therefore as shown in
table 3.1 below.
Table 3.1 Sample Size- Industry breakdown
Industry
TotalMining Manufacturing Agriculture
Food and
Beverages
Financial
Services Construction Telcoms Other
Size SME 1 7 1 1 9 6 0 7 32
Large
Business
3 7 1 10 19 2 5
6
53
Total 4 14 2 11 28 8 5 13 85

17. 12
Having analysed the different way of dividing economic sectors, the researchers opted to divide
the economic sectors of Zimbabwe into seven sectors, namely mining, manufacturing, food and
beverages, financial services, construction, telecommunications, which is relatively similar to the
Reserve Bank of Zimbabwe sectorial breakdowns (RBZ Midterm Monetary Policy, 2015).
3.5 Scales of Measurement
The extent of firm‟s involvement in financial internationalisation was indicated by the presence
of foreign shareholders, foreign debt and investments abroad. This is in line with the
methodology adopted by Urionabarrenetxea and Castellanos (2010) on decisive factors in
company financial internationalization.
In a bid to come up with explanatory variables behind the extent to financial internationalization,
the researchers as was with Urionabarrenetxea and Castellanos (2010) used exports export
activities, firm size and industry of the respective companies under study. The drivers, challenges
and benefits of financial internationalization were determined using a linket scale in line with
empirical literature.
3.6 Data collection and Analysis
Primary data was collected by means of a structured questionnaire. The questionnaires were
collected between 7 April 2016 and 21 April 2016 to which the study obtained 85 valid
responses. The target respondents were companies‟ financial personnel, or if not, the people with
the knowledge of financial activities of the firms. Data collected from the survey was then
subjected to various statistical analysis using SPSS and MS Excel. H1 was tested using the Chi-
squared test.
In line with Urionabarrenetxea and Castellanos (2010), H2 – H5 were tested using the Mann-
Whitney U test, that is, to compare behavior between two subsamples. According to Mann and
Whitney (1947) as cited in Urionabarrenetxea and Castellanos (2010), the Mann-Whitney test is
suitable alternative to the T and Z mean difference test in the context of normality and
homoscedasticity assumption on which they are founded upon, or when the data in use is ordinal.
Furthermore, financial internationalization variables (that is, presence of foreign shareholders,
foreign debt and investments abroad) were then defined as dependents and the other variables as
determinants. In order to come up with a model that adequately match the behavior of the
dependent variables, yet being also parsimonious, all the major impacts of determinant variables
on the dependent variables were therefore subjected to Spearman‟s and Pearson Coefficient
analysis.
The drivers, challenges and benefits of financial internationalization were analyzed using the
coefficient of variation ranking. However, the benefits were further subjected to frequency
analysis.
3.7 Reliability and Validity
The extent to which the research methodology would yield consistent results is referred to as
reliability (Saunders et al, 2007). On the other hand, whether results are really as they appear to
be determines the validity of the study. Ibid. in order to ensure reliability of the research, the

18. 13
anonymity of respondents was emphasized. Moreover, the use of structured closed
questionnaires acts as a safeguard to consistency in messaging employed to pose questions.
Empirical evidence shows that SPSS and MS Excel are reliable packages for data analysis.
Hence findings generated from this study can relatively be replicated thus consequently
guaranteeing the validity and reliability of this study.
3.8 Chapter summary
This chapter explained the methodology employed in this study. The study made use of a
deductive research approach and a survey strategy. The study used a structured questionnaire as
the data collection tool, which data was then subjected to various analyses using SPSS and MS
Excel packages. The results obtained from these analyses are presented in the following chapter.

19. 14
4. DATA ANALYSIS AND PRESENTATION
4.0 Introduction
In this chapter, data is presented and analyzed data in a bid to answer the research problem. This
has been undertaken through concoction the data into more expressive information. The chapter
begins by presenting a response rate and reliability test in order to establish whether would be
generalizable to Zimbabwean firms. The last segment of the chapter presents an analysis of the
extent to which Zimbabwean firms are into FI using quantitative analysis techniques such as
graphs, tables and statistics.
4.1 Response Rate
The researchers hand a sample of 100 companies. However, only 85 of the administered
questionnaires were successfully responded. This implies a response rate of 85% (85/100*100).
As cited by Doba (2014:33), Bell (2003) asserts that a response rate above 50% is
recommendable, hence the rate of 85% was considered enough to justify the study.
4.2 Reliability Test
As shown in Table 4.1 below, the consistency of the questionnaire used was tested using the
Cronbach‟s Alpha. The Cronbach‟s Alpha of 0.804 is way above 0.7 implying that the collected
data is reliable.
Table 4.1: Reliability Test
Cronbach's Alpha N of Items
.804 8
4.3 Univariate Analysis
Making use of foreign investment as a determinant of financial internationalization (FI), the
obtained chi-square in Table 4.1 above is 1.714 with 1 degree of freedom and a significance level
of 0.190. The 0.190 significance level is above 0.05 alpha level implying that the number of
Zimbabwean firms with foreign investments does not significantly differ those firms which does
not have foreign investments.
Table 4.2 Chi-Squared Test
Foreign
Investments Foreign Debts
Foreign
Shareholders
Chi-Square 1.714 15.909 .195
DOF 1 1 1
Asymp. Sig. .190 .000 .659
Moreover, from Table 4.2 above, with respect to the presence of foreign shareholders in
Zimbabwean firms, the chi-square is 0.195. Having a significance level of 0.659 which is way

20. 15
above 0.05 alpha also implies that the firms that have foreign shareholders and those without
does not statically differ at 5% level of significance.
However, as shown in Table 4.2 above, the chi-square with respect to foreign debts is 15.909.
With a significance level of 000 which is way below 0.05 alpha level it means that there is a
significant difference between firms that have foreign debts and those without. In essence, since
foreign debts provides a significant test, the result implies that most Zimbabwean firms are not
into financial internationalization.
Figure 4.1 Level of Financial Internationalization
As shown in figure 4.1 above, 52%, 58% and 73% of Zimbabwean firms does not does not have
foreign shareholders, foreign investments and foreign debts respectively. As highlighted from the
chi-square test above, it can be statistically be concluded that Zimbabwean firms have not been
much involved in financial internationalization since 2009 hence we reject H1.

21. 16
Table 4.3 Decisive Factors to Financial Internationalization
Financial Internationalisation
Decisive Factors
Foreign
Debt
Foreign
Shareholders Investments Abroad
Export
Mann-Whitney U 507.5 581 519
Sig 0.557--
0.015* 0.01*
Size
Mann-Whitney U 424 500 595
Sig 0.139--
0.01* 0.023**
Industry
Mann-Whitney U 408 581.5 673.5
Sig 0.405--
0.437--
0.942--
Technological Intensity
Mann-Whitney U 407 621 668
Sig 0.039** 0.062** 0.102--
Notes: * significant at 1% Level; ** significant at 5% level; not significant at 5% level
Size of business conditions the existence of two dimensions of financial internationalization
namely foreign shareholders and foreign investments. Large businesses tends to engage in
financial internationalization than is SMEs. This is in line with Urionabarrenetxea and
Castellanos (2010) findings which shows that size of a firm is a significant contributor to
financial internationalization. Therefore H2 can partly be accepted.
However, the industry in which a firm operates does not determine its involvement in financial
internationalization as shown by significance levels that are way above 0.05 (that are, 0.405,
0437 and 0.942), implying that H3 is rejected at 0.05 level. This is in contrast with
Urionabarrenetxea and Castellanos (2010) who asserts that company sector is a significant
decisive factor for the presence of foreign debt and foreign shareholders.
From Table 4.3 above, it can also be noted that technological intensity has a significance level of
0.039 and 0.062 for the presence of foreign debt and foreign shareholders in a company.
Therefore we accept H4 meaning that technological intensity of a given industry significantly

22. 17
contributes towards the financial internationalization of a firm. Companies in high-tech
industries tends to have more foreign debt and shareholders than medium and low-tech
industries. High tech equipment tends to be very expensive such that foreign debts and
shareholders provides a cushion against local high cost of capital.
As shown in Table 4.3 above, involvement in export business by a firm has a significance level
of 0.015, and 0.01 in determining the presence of foreign shareholders and investments abroad.
We therefore accept H5 implying that a company‟s involvement in export business conditions the
presence of investments abroad and foreign shareholders. Exporting firms tends to have foreign
shareholders and make foreign investments. Moreover, this is in tandem with Urionabarrenetxea
and Castellanos (2010) who postulates that business internationalization is a primary determinant
of financial internationalization.
Table 4.4 Coefficient Analysis of Financial Internationalization Decisive Factors
Investments Abroad Foreign Debt Foreign Shareholders
Value Significance Value Significance Value Significance
Techno-
intensity
Pearson Coefficient 0.195 0.080 0.238 0.390 0.237 0.340
Spearman Coefficient 0.182 0.102 0.240 0.380 0.210 0.620
Export
Pearson Coefficient 0.360 0.01* 0.680 0.560 0.272 0.150
Spearman Coefficient 0.360 0.01* 0.680 0.560 0.272 0.150
Size
Pearson Coefficient -0.256 0.220 -0.175 0.141 -0.363 0.01*
Spearman Coefficient -0.256 0.220 -0.175 0.141 -0.363 0.01*
Industry
Pearson Coefficient -0.270 0.818 -0.109 0.381 0.680 0.568
Spearman Coefficient -0.090 0.942 -0.860 0.490 0.920 0.441
Notes: * Significant at 1% level.
Table 4.4 shows a 0.01 Pearson Coefficient and Spearman Coefficient for both investments
abroad and foreign shareholders with respect to exports and firm size respectively. This implies
that it can be statistically concluded at 0.01 level of significance that commercial
internationalization (exports) contributes to a firm‟s engagement in foreign investments. On the
other hand, firm size determines the presence of foreign shareholders in it. In essence, larger
firms tends to have foreign investors than SMEs. . Hence on this basis H2 and H5 are accepted at
0.01 level

23. 18
4.4 Drivers for Financial Internationalization
In order to determine the drivers behind financial internationalization of Zimbabwean firms, the
researchers conducted a ranking table of the coefficient of variation score of each factor as
determined in the literature review. These drivers are as presented in Table 4.5 below.
Table 4.5: Ranking of Drivers of Financial Internationalization
Mean SD CV Rank
Restrictions on domestic financial market 2.303 0.783 34.03% 1
Financial Globalization 2.230 0.869 38.96% 2
Part of Strategy 2.361 1.052 44.57% 3
Capability 2.378 1.069 44.94% 4
Need to lower financial cost 2.312 1.055 45.62% 5
Underdevelopment of domestic financial market 2.184 1.067 48.86% 6
Opportunities abroad 2.301 1.151 50.01% 7
Globalization of World economy 1.905 0.953 50.03% 8
Risk Diversification 2.432 3.709 152.48% 9
Note: Based on five Linket scale (Strondly agree, Agree, Neutral, Disagree and Strongly
Disagree)
The main drivers to IF of Zimbabwean firms are restrictions on domestic financial market
(M=2.303; SD=0.783; CV=34.03%), financial globalization (M=2.230; SD= 0.869; CV=
38.96%) and revolving strategies towards FI (M= 2.361; SD=1.052; CV= 44.57%). However,
risk diversification was noted to be the least driving force towards FI by a CV of 152% although
having the highest absolute mean. These findings implies that policy makers should consider
addressing stringent restrictions on the local financial market in order to promote its
development to global standards.
4.5 Challenges with Financial Internationalization
Table 4.6 shows the challenges which Zimbabwean has and or are facing in internationalizing
their financial management.

24. 19
Table 4.6: Ranking of Challenges of Financial Internationalization
Mean SD CV Rank
Lack of managerial resources 3.238 1.058 32.69% 1
Poor appreciation of concept by key stakeholders 2.873 0.966 33.61% 2
Inability to do international marketing 3.063 1.078 35.20% 3
Limited information on international financial markets 2.625 1.084 41.28% 4
Many regulations on financial transactions 2.482 1.050 42.32% 5
Taxation issues 2.325 0.991 42.61% 6
Poor local financial infrastructure 2.375 1.036 43.61% 7
Political uncertainty 2.062 1.004 48.71% 8
Capital shortage 2.247 1.157 51.49% 9
As shown in Table 4.6, the leading challenge in the FI process are the lack of managerial
resources (M=3.2375; SD=1.058; CV=32.69%). Poor appreciation of the concept by key
stakeholders is second (M=2.873; SD=0.966; CV=33.61). This can be attributed to lower
financial literacy in the country hence the need for financial education in the country‟s main
educational curriculums as well as general public education efforts. Although political
uncertainty is a critical economic determinant, its impact on FI has been noted to be minimal and
has been ranked second from the least challenge of lack of initial capital (M=2.247; SD=1.157;
CV=51.49%) to engage on FI. However, as noted earlier, those engaged in FI are still facing
stringent restrictions on international financial transactions. This calls for immediate revision by
policy makers lest it detriments the smooth global financial standards expected of a country.
4.6 Benefits of Financial Internationalization
Table 4.7 Ranking of Benefits from Financial Internationalization
Mean SD CV Rank 1-5% 6-10% 11-15% 16-20% 21+%
Improved operating standards 2.589 1.289 49.80% 1 27.40% 19.20% 30.10% 13.70% 9.60%
Increased market share 2.875 1.453 50.54% 2 23.60% 20.80% 19.40% 16.70% 19.40%
Reduced risk exposure 2.764 1.409 50.98% 3 25.00% 22.20% 19.40% 18.10% 15.30%
Improved access to financial resources 2.878 1.498 52.06% 4 27.00% 16.20% 18.90% 17.60% 20.30%
Improved wealth maximisation 2.817 1.496 53.10% 5 26.80% 22.50% 11.30% 21.10% 18.30%
Increased market power 2.500 1.424 56.97% 6 31.90% 27.80% 12.50% 13.90% 13.90%
Improved profits 2.378 1.559 65.54% 7 27.40% 25.70% 4.10% 9.50% 18.90%
Proportion of FIRMS

25. 20
Table 4.7 shows that improved operating standards has been the main benefit emanating from FI
(M=2.589; SD=1.289; CV=49.80%). The table also shows that 30.1% of the firms into FI
indicated that their operating standards (though subjective) has improved by 11-15% as a result
of FI. FI has also been identified as a driver to an increase in market share which is second
ranked (M=2.875; SD=1.453; CV=50.54%), with 23.6% of firms in FI having realized an
increase in market share by 1-5% as a result. In spite of improvement in profits being the least
ranked benefit, it is worth noting that of the firms that are into FI, 27.40% of them have managed
to realize an increase in profits by 1-5% whilst 25.70% increased their profits by 6-10%. In
relation to that, 26.8% of the firms indicated that their shareholder wealth has also improved by
1-5% whilst 22.5 % indicated an improvement of 6-10% in shareholder wealth.
4.7 Chapter summary.
This chapter focused on the analysis of data in a bid to answer the research questions. A series of
test statistics has been applied as outlined in this research methodology. The following chapter
provides the summary of these findings, conclusions, recommendations and suggestions for
further study.

26. 21
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.0 Introduction
This chapter functions as the ultimate remarks to the entire study through revisiting the principal
objectives of the study and portraying how they were achieved through the findings of the study.
The findings of this study are presented in line with the reviewed literature and research
objectives. Thus, in essence, the chapter deliberates the findings vis-à-vis academic and
empirical findings noted in Chapter two. It is imperative to note that the study would be vain if it
fails to come up with useful solutions to problems identified therein. Finally, this chapter
concludes by providing the suggestions for future work in line with the shortcomings of this
study.
5.1 Summary
The purpose of this study was to examine the extent to which Zimbabwean firms have been
involved in financial internationalisation since the dollarization in 2009, the drivers thereof as
well as its benefits and challenges. However, the main question at post was: are Zimbabwean
firms significantly involved in financial internationalisation? The study was, therefore, an effort
to examine whether Zimbabwean firms are considerably engaged in financial internationalisation
amid the prevalent national financial crisis. The first chapter gave the introduction of the study,
thus, it defined the research problem and spelt the research objectives as well as depicting the
significance of this study. The study also entails a review of theoretical and empirical literature
on financial internationalisation, in chapter two. The research deliberated empirical studies on
financial internationalisation from Europe, Asia, and America. The research design adopted was
that advocated by Saunders et al. (2007) famously known as the onion approach. The
quantitative data collected was statistically analysed using SPSS and Ms Excel packages and the
findings were discussed in the context of the reviewed literature in order to arise with the
conclusions and recommendations enunciated below.
5.2 Conclusion
In a bid to determine the extent to which Zimbabwean firms are involved in financial
internationalisation since 2009, presence of foreign shareholders, foreign debt and investments
abroad were used as indicators of financial internationalisation. On this basis, it can therefore be
concluded that Zimbabwean firms are not significantly engaged into financial
internationalisation. This is facilitated by a number of challenges that are acting as deterrents to

27. 22
financial internationalisation, the prime ones being lack of managerial resources and poor
appreciation of the concept by key stakeholders.
However, despite the low extent of involvement into financial internationalization, of the firms
already engaged, it can also be concluded that the level of a firm‟s commercial
internationalization (exports) contributes to a firm‟s engagement in foreign investments whilst
firm size determines the presence of foreign shareholders in it. In essence, larger firms tends to
have the capacity to export hence attractive to foreign investors than SMEs.
The restrictions on local financial market and the need to keep track with financial globalisation
has also been identified as the key drivers to financial internationalisation by some of the firms
that are already engaged therein. This has provided with handsome payoff to these firms such as
improved operating standards, improved market share and market power as well as improved
shareholder wealth maximisation which is the core purpose of existence of business.
5.3 Recommendations
5.3.1 Revision of Financial market regulations
One of the leading drivers to financial internationalization is the stringent restrictions on the local
financial market. Policy makers should consider addressing stringent restrictions on the local
financial market in order to promote its development to viable global standards.
5.3.2 Financial Education
Poor appreciation of financial internationalisation philosophy has been identified as the one of
the prime deterrents to FI. Education on financial literacy is therefore recommendable at all
organisational levels as well as the country in general. This can be done through financial
literacy subjects even in non-commercial courses as is now done with respect to basic computer
skills.
5.4 Suggestions for further study
The study has examined the extent to which Zimbabwean firms are involved into financial
internationalization using a sample of 85 companies. The study can further be developed by
increasing the sample size as well as increasing the decisive variables. Other data analysis
models such as the Logit model can further be used to drill down on the contributors to financial
internationalization.

28. 23
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