Financial management strategies in emerging markets: A review of theoretical models and practical applications
1 S. C. C. Nigeria Limited.
2 University of Hertfordshire Hatfield, United Kingdom.
3 Kent Business School, University of Kent, UK.
4 Independent Researcher, Bloomfield, NJ, USA.
Review Article
Magna Scientia Advanced Research and Reviews, 2023, 07(02), 123-140
Article DOI: 10.30574/msarr.2023.7.2.0054
Publication history:
Received on 18 February 2023; revised on 19 April 2023; accepted on 22 April 2023
Abstract:
Financial management in emerging markets presents unique challenges and opportunities, driven by dynamic economic conditions, regulatory frameworks, and cultural nuances. This review explores theoretical models and practical applications of financial management strategies tailored to these contexts. Emerging markets often exhibit high volatility, limited access to capital, and underdeveloped financial systems, necessitating innovative approaches to resource allocation, risk management, and investment decision-making. Theoretical models such as agency theory, pecking order theory, and the trade-off theory are evaluated for their applicability in emerging market settings. These models provide insights into capital structure optimization, corporate governance, and cost of capital considerations. Additionally, behavioral finance theories are reviewed to address the role of investor psychology and market inefficiencies in shaping financial decisions. Practical applications of financial management strategies in emerging markets focus on leveraging microfinance, fintech innovations, and sustainable finance solutions to overcome systemic constraints. Strategies such as dynamic working capital management, diversification of funding sources, and risk mitigation through hedging instruments are examined. Furthermore, the role of government policies, regulatory frameworks, and international financial institutions in shaping market dynamics is analyzed. This review underscores the critical importance of adapting financial management practices to local conditions while embracing global best practices to enhance resilience and growth. It highlights successful case studies demonstrating how firms in emerging markets have navigated economic and institutional challenges to achieve financial stability and competitive advantage. The findings provide actionable insights for policymakers, financial managers, and researchers seeking to deepen their understanding of financial management strategies in emerging markets. Future research directions include exploring the integration of artificial intelligence in financial decision-making and assessing the impact of geopolitical shifts on financial management practices.
Keywords:
Financial Management; Emerging Markets; Theoretical Models; Practical Applications; Agency Theory; Pecking Order Theory; Trade-Off Theory; Behavioral Finance; Microfinance, Fintech; Sustainable Finance; Capital Structure; Risk Management; Market Inefficiencies; Regulatory Frameworks
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Copyright © 2023 Author(s) retain the copyright of this article. This article is published under the terms of the Creative Commons Attribution Liscense 4.0