CAPITAL MARKET PERFORMANCE INDICATORS AND ECONOMIC DEVELOPMENT OF SUB-SAHARAN AFRICA (1997 – 2017)
ABSTRACT
This study examined the impact of capital market performance indicators on the economic development of three Sub-Saharan Africa (SSA) countries of Mauritius, Nigeria, and South Africa. The specific objectives of this study are to: examine the impact of stock market size on the economic development of SSA countries; evaluate the impact of stock market liquidity on the economic development of SSA countries; identify the extent to which the stock market volatility contributes to the economic development of SSA countries; evaluate the impact of mutual fund assets on the economic development of SSA countries; examine the impact of equity capital as a component of foreign direct investment on the economic development of SSA countries; and evaluate the impact of combined stock market indicators on economic development of SSA countries. In line with these objectives, six research questions and six hypotheses were formulated. The study adopted the ex-post facto research design. Data for the study were collected from the World Bank Database and the United Nations Development Programme Database for the period 1997 to 2017. Human Development Index (HDI) was used as proxy for economic development and is also the dependent variable while the independent variables are stock market capitalization (MCAP), stock market turnover ratio (TOR), stock market value traded (TVT), listed companies equities (LCE), all share index (ASI), mutual fund assets (MFA) and equity capital were used as proxy for capital market performance indicators. The inflation rate, exchange rate, and lending interest rate were also introduced as control variables. Measure of central tendency was used to describe the characteristics of the variables; Augmented Dickey-Fuller unit root test was used for stationarity test of the data; Johansen Co-integration test was used for the long-run relationship of the variables; Ordinary Least Square (OLS) technique was used to test the hypotheses, at a 5% level of significance. The results reveal that: stock market size was positive in the three countries and significant in Mauritius and South Africa and insignificant in Nigeria; Stock market liquidity was positive and significant in Mauritius and South Africa but insignificant Nigeria; Stock market volatility was positive and significant in Mauritius and Nigeria but insignificant in South Africa; Mutual fund assets, equity capital and combined stock market indicators were positive and significant in the three countries. The study concludes that the capital market is the most accessible market for long-term fund geared towards economic development in the three SSA countries studied. The study recommended that the government should encourage more profitable companies to enlist on the stock exchange to further increase the size of the market; investment in mutual fund assets should be encouraged among investors; foreign direct investment in form of capital equity should be encouraged among foreign investors and indigenes in the diaspora; and government should give adequate publicity to enlighten companies seeking long-term funds to go to the capital market because of the amount of funds available in it. This study contributed to the body of knowledge by modifying existing models and also using HDI as a proxy for economic development in three countries studied and also extended the time scope of existing literature to 2017 and introduced Mutual Fund Assets model among the models.