Finance, Institutions, and Private Investment in Africa

Abstract

The study extends the debate on finance versus institutions and measurement of property rights institutions. We assess the relationships between various components of property rights institutions and private investment, notably: political, economic and institutional governances. Comparative concurrent relationships of financial dynamics of depth, efficiency, activity and size are also investigated. The findings provide support for the quality of institutions as a better positive correlate of private investment than financial intermediary development. The interaction of finance and governance is not significant in potentially promoting private investment, perhaps due to substantially documented surplus liquidity issues in African financial institutions. The empirical evidence is based on 53 African countries for the period 1996-2010. Policy measures are discussed for reducing financial deposits, increasing financial activity and hence, improving financial efficiency.

Human Development and Governance in Africa

“…This study complements the extant literature by assessing the nexus between governance and economic development within the remit of human development in Africa by employing an estimation approach that accounts for spatial dependence in order to further examine the perspective of whether good fences make good neighbors. While there is a large bulk of literature on the relationship between economic development and institutions (Adedokun 2017; Al Mamun et al 2017; Asongu et al 2021; Fayissa and Nsiah 2013; Huynh and Jacho‐Chávez 2009; Kaufmann and Kraay 2002; Setayesh and Daryaei 2017; Tchamyou 2021), the nexus between governance and human development has not been thoroughly explored in the literature, especially as it pertains to the employment of spatial dependence estimation approaches.…”