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FINANCIAL DEEPENING AND STOCK MARKET PERFORMANCE IN SELECTED SUB-SAHARA AFRICAN COUNTRIES

Year 2022, , 30 - 38, 30.03.2022
https://doi.org/10.17261/Pressacademia.2022.1543

Abstract

Purpose- The study investigates the effect of financial deepening on stock market performance in selected Sub-Saharan African countries by
determining the relationship that exist between financial deepening and stock market performance. Expansion in the financial services to
reach out to the underbanked or unbanked in our society enables these individuals to assess banking services, thereby boosting economic
activities.
Methodology- The study considers four selected countries in Sub-Saharan African over the period 2001 to 2019. Multiple regression analysis
techniques were used with Seemingly Unrelated Regression (SUR) to analyse the data. SUR used in this analysis provides the lowest standard
errors of the estimated parameters.
Findings- Ordinary Least Square (OLS) gives consistent results. However, it is not as efficient as the SUR method, which amounts to feasible
generalised least squares with a specific form of the variance matrix. It solves the problem of endogeneity. The study conducted Augmented
Dicky Fuller (ADF) test, Hausman test, and Bruce Pagan test to avoid any challenges associated with data normality.
Conclusion- The research finds out that broad money supply, a proxy for financial deepening, positively and statistically significantly impacted
stock market performance in each of the four countries. It was recommended that all countries involved in this study and others implement
policies that seek to enhance financial deepening in increasing broad money supply as a percentage of GDP. The increase in overall money
supply allows for investment in productive sectors of the economy.

References

  • Aizenman, J. (2005). Financial liberalisations in Latin America in the 1990s: a reassessment. The World Economy, 28(7), 959–83.
  • Alenoghena, R. O. (2014). Capital market, financial deepening and Nigeria’s economic growth: empirical evidence. Journal of Economic & Financial Studies, 2(04), 43. https://doi.org/10.18533/jefs.v2i03.69
  • Alrabadi & Kharabsheh (2016). Financial deepening and economic growth : the case of Jordan. Journal of Accounting and Finance, 16, 158– 166.
  • Best, A., Francis, B. M., & Robinson, C. J. (2017). Financial deepening and economic growth in Jamaica. Global Business Review, 18(1), 1–18. https://doi.org/10.1177/0972150916666744
  • Bikker, J.A., Hu, H., (2002), Cyclical patterns in profits, provisioning, and banks' lending and procyclicality of the new Basel capital requirements. BNL Quarterly Review, 221, 143–175.
  • Gertler, M., & Kiyotaki, N. (2015). Banking, liquidity, and bank run in an infinite horizon economy. American Economic Review, 105(7), 2011– 2043. https://doi.org/10.1257/aer.20130665
  • Goddard (2004) The profitability of European banks: a cross-sectional and dynamic panel analysis. Manchester School, 72, 363–381.
  • Goldsmith, R.W. (1969), Financial Structure and Development, New Haven: Yale University PressJalil, A., Wahid, A. N. M., & Shahbaz, M. (2010). Financial development and growth: A positive, monotonic relationship? Empirical evidence from South Africa. Munich Personal RePEc Archive MPRA, 35423, 27668.
  • King, R.G., and R.Levine. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108(3), 717-38.
  • Levine, R. 2005. Finance and Growth: Theory and Evidence. Philippe A, Steven D. (2edn.), Handbook of Economic Growth, 1(1): 865-934
  • Linda, M., & Bakang, N. (2014). Effects of financial deepening on economic growth in Kenya. International Journal of Business and Commerce, 4(407), 1–50. www.ijbcnet.com
  • McKinnon, R. (1973). Money and capital in economic development. Washington, DC: Brookings Institution.
  • Ndege, F. (2012). The impact of financial sector deepening on economic growth in Kenya, Unpublished MBA Project, UON.
  • Ndebbio, J.E.U. (2004) Financial Deepening, Economic Growth and Development: Evidence from Selected SSA Countries. African Economic and Research Consor- tium, RP142.
  • Nguena, C. L. and Abimbola, T. (2013). Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU. African Economic Conference 2013 Regional Integration, Johannesburg, South Africa.
  • Nnanna, O. J. and Dogo, M. (1998). Structural reform, monetary policy and financial deepening: the Nigerian experience. Economic and Financial Review, 36(2) 1-29.
  • Nzotta, S. M. (2004). Money, Banking and Finance, Theory and Practice Owerri. Hudson Jude Publishers.
  • Nzotta, S. M. (2009). Financial deepening and economic development of Nigeria : an empirical investigation. Finance and Banking. 5(5), 52– 66.
  • Ochanda, M. M. (2014). Effect of financial deepening on the growth of small and medium-sized enterprises in Kenya: A case of Nairobi County. International Journal of Social Sciences and Entrepreneurship, 1(11), 191-208.
  • Odhiambo, N. M., (2008). Financial depth, savings and economic growth in Kenya: a dynamic causal relationship. Economic Modelling, 25, 704-713.
  • Okeya, I. O., & Dare, D. F. (2020). Financial Deepening and Stock Market Development : Evidence from Nigeria. 7(June), 329–342.
  • Okoli, M. N. (2010). Evaluating the nexus between financial deepening and the stock market in Nigeria. E-Journal of the Social Science Researches, 4(2), 1–16.
  • Onwumere1, Imo G. Ibe, Frank O. Ozoh, O. M. (2012). The Impact of Financial Deepening on Economic Growth: Evidence from Nigeria. WSEAS Transactions on Business and Economics, 3(10), 64–71. https://doi.org/10.37394/23207.2020.17.96
  • Paramati, S. R., & Gupta, R. (2011). An empirical analysis of stock market performance and economic growth: Evidence from India. International Research Journal of Finance and Economics, 73(73), 144–160. https://doi.org/10.2139/ssrn.2335996
  • Sackey, F. G., & Nkurumah, E. M. (2012). Financial sector deepening and economic growth in Ghana. Journal of Economic and Sustainable Development, 3(8), 122-140.
  • Schumpeter, J.A. (1912). The Theory of Economic Development. Harvard University Press.
  • Schumpeter J. A. (1934). The Theory of Economic Development Cambridge Mass, Harvard University Press.
  • Shaw, E. (1973). Financial deepening in economic development. New York: Oxford University Press.
  • Uddin, G. S., Sjö, B., & Shahbaz, M. (2013). The causal nexus between financial development and economic growth in Kenya. Economic Modelling, 35(49262), 701–707. https://doi.org/10.1016/j.econmod.2013.08.031
  • World Bank. (2018). World development indicators, 2018. Washington, DC: World Bank. Yemane Wolde-Rufael. Re-examining the financial development and economic growth nexus in Kenya. Economic Modelling, 26(6), 1140-1146. https://doi.org/10.1016/j.econmod.2009.05.002
  • Zellner, A. (1962) An Efficiency Method of Estimating Seemingly Unrelated Regres- sions and Test for Aggregation Bias. Journal of the American Statistical Association, 57, 348-368. https://doi.org/10.1080/01621459.1962.10480664
Year 2022, , 30 - 38, 30.03.2022
https://doi.org/10.17261/Pressacademia.2022.1543

Abstract

References

  • Aizenman, J. (2005). Financial liberalisations in Latin America in the 1990s: a reassessment. The World Economy, 28(7), 959–83.
  • Alenoghena, R. O. (2014). Capital market, financial deepening and Nigeria’s economic growth: empirical evidence. Journal of Economic & Financial Studies, 2(04), 43. https://doi.org/10.18533/jefs.v2i03.69
  • Alrabadi & Kharabsheh (2016). Financial deepening and economic growth : the case of Jordan. Journal of Accounting and Finance, 16, 158– 166.
  • Best, A., Francis, B. M., & Robinson, C. J. (2017). Financial deepening and economic growth in Jamaica. Global Business Review, 18(1), 1–18. https://doi.org/10.1177/0972150916666744
  • Bikker, J.A., Hu, H., (2002), Cyclical patterns in profits, provisioning, and banks' lending and procyclicality of the new Basel capital requirements. BNL Quarterly Review, 221, 143–175.
  • Gertler, M., & Kiyotaki, N. (2015). Banking, liquidity, and bank run in an infinite horizon economy. American Economic Review, 105(7), 2011– 2043. https://doi.org/10.1257/aer.20130665
  • Goddard (2004) The profitability of European banks: a cross-sectional and dynamic panel analysis. Manchester School, 72, 363–381.
  • Goldsmith, R.W. (1969), Financial Structure and Development, New Haven: Yale University PressJalil, A., Wahid, A. N. M., & Shahbaz, M. (2010). Financial development and growth: A positive, monotonic relationship? Empirical evidence from South Africa. Munich Personal RePEc Archive MPRA, 35423, 27668.
  • King, R.G., and R.Levine. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108(3), 717-38.
  • Levine, R. 2005. Finance and Growth: Theory and Evidence. Philippe A, Steven D. (2edn.), Handbook of Economic Growth, 1(1): 865-934
  • Linda, M., & Bakang, N. (2014). Effects of financial deepening on economic growth in Kenya. International Journal of Business and Commerce, 4(407), 1–50. www.ijbcnet.com
  • McKinnon, R. (1973). Money and capital in economic development. Washington, DC: Brookings Institution.
  • Ndege, F. (2012). The impact of financial sector deepening on economic growth in Kenya, Unpublished MBA Project, UON.
  • Ndebbio, J.E.U. (2004) Financial Deepening, Economic Growth and Development: Evidence from Selected SSA Countries. African Economic and Research Consor- tium, RP142.
  • Nguena, C. L. and Abimbola, T. (2013). Financial Deepening Dynamics and Implication for Financial Policy Coordination in a Monetary Union: the case of WAEMU. African Economic Conference 2013 Regional Integration, Johannesburg, South Africa.
  • Nnanna, O. J. and Dogo, M. (1998). Structural reform, monetary policy and financial deepening: the Nigerian experience. Economic and Financial Review, 36(2) 1-29.
  • Nzotta, S. M. (2004). Money, Banking and Finance, Theory and Practice Owerri. Hudson Jude Publishers.
  • Nzotta, S. M. (2009). Financial deepening and economic development of Nigeria : an empirical investigation. Finance and Banking. 5(5), 52– 66.
  • Ochanda, M. M. (2014). Effect of financial deepening on the growth of small and medium-sized enterprises in Kenya: A case of Nairobi County. International Journal of Social Sciences and Entrepreneurship, 1(11), 191-208.
  • Odhiambo, N. M., (2008). Financial depth, savings and economic growth in Kenya: a dynamic causal relationship. Economic Modelling, 25, 704-713.
  • Okeya, I. O., & Dare, D. F. (2020). Financial Deepening and Stock Market Development : Evidence from Nigeria. 7(June), 329–342.
  • Okoli, M. N. (2010). Evaluating the nexus between financial deepening and the stock market in Nigeria. E-Journal of the Social Science Researches, 4(2), 1–16.
  • Onwumere1, Imo G. Ibe, Frank O. Ozoh, O. M. (2012). The Impact of Financial Deepening on Economic Growth: Evidence from Nigeria. WSEAS Transactions on Business and Economics, 3(10), 64–71. https://doi.org/10.37394/23207.2020.17.96
  • Paramati, S. R., & Gupta, R. (2011). An empirical analysis of stock market performance and economic growth: Evidence from India. International Research Journal of Finance and Economics, 73(73), 144–160. https://doi.org/10.2139/ssrn.2335996
  • Sackey, F. G., & Nkurumah, E. M. (2012). Financial sector deepening and economic growth in Ghana. Journal of Economic and Sustainable Development, 3(8), 122-140.
  • Schumpeter, J.A. (1912). The Theory of Economic Development. Harvard University Press.
  • Schumpeter J. A. (1934). The Theory of Economic Development Cambridge Mass, Harvard University Press.
  • Shaw, E. (1973). Financial deepening in economic development. New York: Oxford University Press.
  • Uddin, G. S., Sjö, B., & Shahbaz, M. (2013). The causal nexus between financial development and economic growth in Kenya. Economic Modelling, 35(49262), 701–707. https://doi.org/10.1016/j.econmod.2013.08.031
  • World Bank. (2018). World development indicators, 2018. Washington, DC: World Bank. Yemane Wolde-Rufael. Re-examining the financial development and economic growth nexus in Kenya. Economic Modelling, 26(6), 1140-1146. https://doi.org/10.1016/j.econmod.2009.05.002
  • Zellner, A. (1962) An Efficiency Method of Estimating Seemingly Unrelated Regres- sions and Test for Aggregation Bias. Journal of the American Statistical Association, 57, 348-368. https://doi.org/10.1080/01621459.1962.10480664
There are 31 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Edward Attah-botchwey This is me 0000-0003-1140-5786

David Mensah Awadzie This is me 0000-0001-5532-2152

Williams Agbenyezi This is me 0000-0003-2122-1518

Publication Date March 30, 2022
Published in Issue Year 2022

Cite

APA Attah-botchwey, E., Awadzie, D. M., & Agbenyezi, W. (2022). FINANCIAL DEEPENING AND STOCK MARKET PERFORMANCE IN SELECTED SUB-SAHARA AFRICAN COUNTRIES. Journal of Economics Finance and Accounting, 9(1), 30-38. https://doi.org/10.17261/Pressacademia.2022.1543

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