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

Year 2022, Volume: 9 Issue: 1, 30 - 38, 30.03.2022

Edward Attah-botchwey David Mensah Awadzie Williams Agbenyezi

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.

Keywords

Sub-Saharan Africa, seemingly unrelated regression, Augmented Dicky Fuller, investigates, ordinary least squares

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