Poverty Reduction and Stock Market Development: Evidence from Africa

Abstract

Despite the increased number of stock exchanges in Africa, this segment of the financial market remains underdeveloped with low market capitalization, volume and illiquidity. Furthermore, the aftershock of the 2008 financial crisis exacerbates the poor market condition with the attendant decrease in investment. Efforts of previous policies to promote stock market development and restore investors’ confidence did not yield a positive outcome as they are yet to meet the rising demand for capital needed by domestic firms. This paper examines the relationship between poverty reduction and stock market development in Africa, using the pooled mean group (PMG) model for the sample period of 1996 to 2016. The findings suggest poverty reduction has a positive effect on stock market development both in the long-run and short-run estimates. For policy prescription, the government of the respective countries should implement programs that will promote financial inclusion and alleviate poverty to promote domestic investment in stock markets in the region.

Good Governance and Sustainable Investment: The Effects of Governance Indicators on Stock Market Returns

“…So, many investors prefer to invest their wealth in the market with good quality and implementation of regulations and policies. It conforms to the findings of (Umar & Nayan, 2018), which found that regulatory quality matters for stock market development and is expected to handle the repercussion of the financial crisis in Africa. The results are also supported by the study of Eldomiaty et al (2019) and Imran et al (2020), which indicate a positive and significant association between regulatory quality and the stock market.…”

“…The higher quality regulations (REQ), particularly in low-income countries, will result in higher stock market performance (Boadi & Amegbe, 2017). Additionally, regulatory quality matters for stock market development and is expected to handle the repercussion of the financial crisis in Africa (Umar & Nayan, 2018). The results are also supported by the study in MENA, North America, and South Asia, which indicate a positive and significant association between regulatory quality and the stock market (Eldomiaty et al, 2019;Imran et al, 2020).…”

Measuring global pandemic governance: how countries respond to COVID-19

“…Regulatory quality is understood as the government's capacity to formulate and implement its policies/regulations relating to the development sector (Kaufmann et al, 2010). In general, regulatory quality identifies how governments articulate and execute policies capable of supporting and promoting investments in the private sector (Umar & Nayan, 2018). Research by Nistotskaya and Cingolani (2015) shows that positive correlation between bureaucratic structure and regulatory quality can generate good economic growth by enhancing entrepreneurial development.…”

Stock market development: a reflection of governance regulatory framework in Nigeria

“…These scenarios have consistently challenged the availability of evidence-based for the government of its role in the designing of viable regulatory policy in the country. Since the bulk of studies concerned with elucidating why a sound regulatory policy can have real effects for the stock market have mostly employed regression approach to cross-country or panel data (Eita, 2015;Winfu et al, 2016;Umar and Nayan, 2018;Imran et al, 2020), there is need to provide critical evidence that would help the government develop regulatory measures that could work better. The study's aim is not concerned with particular categories of regulation (such as competition law and employment law) but rather how to enhance the processes for improving regulation in Nigerian context.…”

“…where SMKT t is the stock market performance indicatorsmarket capitalization ratio (MRK) and Value trade ratio (VTR); REG t; represents regulatory quality, while X t is a vector of some economic indicators that could affect stock market performance; t is the time dimension. These stock market indicators have been widely used in the literature and they are regarded as key measures of market performance Fagbemi and Ajibike, 2018;Umar, 2018). Furthermore, based on Pesaran et al (2001), the conditional ARDL (p, q) error correction model (ECM) is stated as:…”