Macroeconomic factors and stock market development in sub-Saharan Africa: does the measure of stock market development matter?

This paper examines the impact of stock market development on economic growth in Sub‑Saharan Africa using a balanced panel data of five selected countries over the period 1993 – 2013 and the system generalised method of moments dynamic panel estimation framework. The paper finds a positive impact of stock market development proxied by the turnover ratio of domestic shares and market capitalization on economic growth though minimal. Furthermore, investment, lagged gross domestic product and human capital were found to have a significantly positive impact on growth while trade and foreign direct investment negatively impacted on growth, even though the results for foreign direct investment is not significant in all the models and consequently, not very robust. There should be policy measures aimed at enhancing economic growth using the development of the stocks market as a channel. Such policies should focus on developing the appropriate mix of taxation of investors as well as the development of requisite technology, institutional and regulatory framework that will facilitate an increase in the size and liquidity of the market in the sub‑region.

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The Effect of Macroeconomic Factors on the Stock Market Development in Asia-Pacific Countries

Fiscaoeconomia ◽

10.25295/fsecon.851028 ◽

2021 ◽

Vol 5 (1) ◽

pp. 195-218

Author(s):

Gökhan ÖZKUL ◽

Muhammed KASIM

Keyword(s):

Stock Market ◽

Asia Pacific ◽

Market Development ◽

Macroeconomic Factors ◽

Stock Market Development

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Firm-specific and Macroeconomic Determinants of Capital Structure: Evidence from Pharmaceutical Industry in Bangladesh

Khulna University Business Review ◽

10.35649/kubr.2016.11.12.4 ◽

2018 ◽

pp. 43-57

Author(s):

K.M. Zahidul Islam ◽

Meskat Ibne Sharif ◽

Md. Nurul Hoque

Keyword(s):

Stock Market ◽

Capital Structure ◽

Interest Rates ◽

Practical Implication ◽

Market Development ◽

Gdp Growth ◽

Significant Positive Association ◽

Macroeconomic Factors ◽

Stock Market Development ◽

Pharmaceutical Firms

Purpose: This study explores the significance of firm-specific and macroeconomic factors to explain variation in leverage using a sample of twenty listed pharmaceutical firms in Dhaka Stock Exchange over a six year period of 2008-2012. Design: In this study, panel data has been used and both firm specific and macroeconomic factors are analyzed as the determinants of leverage for pharmaceuticals firms in Bangladesh. Findings: This study employs leverage measure (book leverage) as dependent variable and ten factors (liquidity, profitability, tangibility, debt coverage, growth rate, firm size, GDP growth, and inflation, interest rate, and stock market development) as determinants of capital structure. Around 51% variation in leverage is explained by selected macroeconomic and firm specific factors, while the remainder is explained by unobserved macroeconomic and firm specific differences. Practical Implication: Estimated results show that GDP growth has significant positive association with the leverage. However, liquidity, profitability, tangibility, sales growth, inflation, interest rates, and stock market development reveal inverse relation with leverage. Finally the results suggest that that both trade-off and pecking order theories can explain financing decisions of listed pharmaceutical firms in Bangladesh.

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Determinants of stock market development: a review of the literature

Studies in Economics and Finance ◽

10.1108/sef-05-2016-0111 ◽

2017 ◽

Vol 34 (1) ◽

pp. 143-164 ◽

Cited By ~ 17

Author(s):

Sin-Yu Ho ◽

Bernard Njindan Iyke

Keyword(s):

Stock Market ◽

Real Income ◽

Institutional Factors ◽

Market Development ◽

Empirical Literature ◽

Large Set ◽

Review Of The Literature ◽

Macroeconomic Factors ◽

Content Type ◽

Stock Market Development

Purpose This paper aims to provide a comprehensive review of the literature on the determinants of stock market development. Design/methodology/approach The paper divides the existing studies into the theoretical and empirical literature. Then, it analyses these studies in turn. Findings Based on the theoretical literature, the determinants of stock market development can be broadly classified into two groups: macroeconomic factors and institutional factors. The theory and the empirics predict different ways in which macroeconomic factors affect stock market development. The real income and its growth rate foster stock market development, while the banking sector, interest rate and private capital flows can foster or inhibit it. Inflation and exchange rates have adverse effects on stock market development. In terms of the institutional factors, the literature indicates that different legal origins and stock market integration can have a positive or negative impact on stock market development. In addition, factors such as legal protection of investors, corporate governance, financial liberalisation and trade openness contribute positively to the development of the stock market. Research limitations/implications From the survey, it is imperative that policies which aim at enhancing institutional quality, financial integration, real income growth, macroeconomic stability and capital inflows, among others, will certainly promote stock market development within and across countries. Although the empirical studies have incorporated a large set of variables in their models, the theoretical studies do not contain rich models of stock market development. It is understandable that a theoretical model which contains a large set of the determinants of stock market development may be difficult to solve. However, such a model seems very appealing and will provide a unification of the existing literature. Originality/value The originality of the paper lies in the fact that it is the first to undertake a survey of the determinants of stock market development in the literature. It is hoped that this paper will spur further theoretical and empirical research on the determinants of stock market development.

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