Determinants of Capital Market Development in Nigeria: A Public Governance Approach

Gbenga Festus Babarinde

Abstract


Purpose: This study examined the determinants of capital market development in Nigeria through the lens of six indicators of public governance, during the period, 1996-2023.

Methodology: Autoregressive Distributed Lag (ARDL) technique was applied to the annual time series data on capital market development and governance indicators obtained from Central Bank of Nigeria’s Statistical Bulletin and World Bank’s Worldwide Governance Indicators respectively.  

Results: The study found that government effectiveness, political stability, and rule of law positively and significantly impacted capital market development while voice and accountability had negative and significant impact on capital market development. However, control of corruption, and regulatory quality had no significant impact on capital market development in Nigeria.

Practical implication:  Government effectiveness, political stability, rule of law, and voice and accountability are institutional determinants of capital market development in Nigeria.

Originality: The study recommends for the improvement of public governance quality in Nigeria by putting in place policies and programmes that will facilitate government effectiveness, political stability, and rule of law, which will stimulate the development of capital market in Nigeria.

Keywords: Capital Market; Determinants; Institutional Quality; Public Governance; Stock Market.

DOI: 10.58869/EJABM11(2)/08


Full Text:

PDF

References


Abu, A. J., Olalekan, A. U., & Adekunle, B.O. (2022). Impact of institutional factors on stock markets: Evidence from Sub-Saharan African countries. International Journal of Development Strategies in Humanities, Management and Social Sciences, 9(4), 186-202.

Abubakar, S. (2020). Institutional quality and economic growth: Evidence from Nigeria. African Journal of Economic Review, 8(1), 48-64.

Adekunle, O. D. (2024). Analysis of capital market development and economic growth in Nigeria. African Journal of Economics and Sustainable Development, 7(4), 96-112. DOI: 10.52589/AJESDYKX6VNZX

Adeniyi, D. S. (2022). Governance and the implementation of public policies in Nigeria. Research Journal of Management Practice, 2(7), 11-19.

Agwanwo, D. E., & Bello, I. (2019). Governance, violence and the challenge of internal security in Rivers State, Nigeria. The Nigerian Journal of Sociology and Anthropology, 17(1), 35-47. https://doi.org/10.36108/ NJSA/9102/71(0130)

Babarinde, G. F. (2021). Time series analysis of stock market indicators and their relative impacts on market capitalization in Nigeria (1985-2019). Indo-Asian Journal of Finance and Accounting, 2(1), 173-194.

Babarinde, G. F., & Enoruwa, K. O. (2021). Financial deepening, stock market returns and liquidity management in Nigeria. Gusau Journal of Accounting and Finance, 2(2), 1-14.

Babarinde, G. F., Abdulmajeed, T. I., Mohammed, H. K., & Shuaib, A. A. (2020). Relationship between stock market indicators and gross capital formation in Nigeria (1985-2018): A long-run analysis. Nigerian Journal of Accounting and Finance, 12(1), 102-116.

Babarinde, G. F., Onyejiaku, C. C., Obadire, A. M., Pridy, A. A., & Onwumere, J. U. J. (2024). Impact of digital finance on stock market performance in Nigeria (2012M1-2021M12). International Journal of Professional Business Review, 9(3), 1-34.

Boadi, I., & Amegbe, H. (2017). The link between quality of governance and stock market performance: International level evidence. European Journal of Government and Economics, 6(1), 78–101. https://doi.org/10.17979/ejge.2017.6.1.4324

El-Wassal, K. A. (2013). The development of stock markets: In search of a theory. International Journal of Economics and Financial Issues, 3(3), 606-624.

Fagbemi, F., Adeosun, O. A., & Bello, K. M. (2021). Stock market development: A reflection of governance regulatory framework in Nigeria. Journal of Capital Markets Studies, 6(1), 71-89. DOI 10.1108/JCMS-07-2021-0022

Fapetu, O., Ojo, S. M., Balogun, A. A., & Asaolu, A. A. (2021). Capital market performance and macroeconomic dynamics in Nigeria. Fuoye Journal of Finance and Contemporary Issue, 1(1), 29-37.

Ibrahim, S. Y. (2016). Security and governance in Bauchi State of Nigeria. In H. Abdu, & C. Okoro (Eds.), Security and governance in North East Nigeria (pp.59-84). CLEEN Foundation.

Imran, Z. A., Ejaz, A., Spulbar, E. C.., Birau, R. B., & Nethravathi, P. S. R. (2020). Measuring the impact of governance quality on stock market performance in developed countries. Economic Research, 33(1), 3406-3426, DOI: 10.1080/1331677X.2020.1774789

Izuchukwu, A., Awakessien, C., & Awakessien, S. (2024). Corruption and governance: Examining the impact on political stability in Nigeria. IIARD International Journal of Social Sciences and Management Research, 10(2), 1-19.

https://doi.org10.56201/ijssmr.v10.no2.2024.pg1.19

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The worldwide governance indicators: A summary of methodology, data and analytical issues (World Bank policy research working paper no. 5430).

Khan, A. A, Munir, F., Abbas, J., & Umar, M. (2022). Does governance quality enhance stock market performance: Empirical evidence from Pakistan. Review of Applied Management and Social Sciences, 5(2), 207-217.

Manasseh, C. O., Mathew, T. E., & Ogbuabor, J. E. (2017). Investigating the nexus between institutional quality and stock market development in Nigeria: An autoregressive distributed lag (ARDL) approach. African Development Review, 29, 272-292, https://doi.org/10.1111/1467-8268.12256

Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340-363. https://doi.org/10.1086/226550

Modugu, K. P., & Dempere, J. (2020). Country-level governance quality and stock market performance of GCC countries. Journal of Asian Finance, Economics and Business, 7(8) 185–195.

Ndugbu, M. O., Otiw, K. C., & Nwaguru, W. E. (2024a). Governance and market capitalization in the Nigerian capital market. IIARD Journal of Business and African Economy, 10(1), 13-39. DOI: 10.56201/jbae.v10.no1.2024.pg13.39

Ndugbu, M. O., Otiwu, K. C., & Nwaguru, W. E. (2024b). Governance and all-share index in the Nigerian capital market. International Journal of Economics and Financial Management, 9(2), 46-72. DOI: 10.56201/ijefm.v9.no2.2024.pg46.72

Umar, B., & Nayan, S. (2018). Does regulatory quality matters for stock market development? Evidence from Africa. International Journal of Economics and Financial Issues, 8(4), 10-15.

Utile, T. I., Ijirshar, V. U., & Sem, A. (2021). Impact of institutional quality on economic growth in Nigeria. Gusau International Journal of Management and Social Sciences, 4(3), 157-177.

Yakubu, I. N., Kapusuzoglu, A., & Ceylan, N. B. (2021). Examining the nexus between institutional quality and stock market development: Evidence from Ghana. Finansa lAraştırmalar ve Çalışmalar Dergisi, 13(25), 864-878.




Copyright (c) 2025 European Journal of Applied Business and Management

 

European Journal of Applied Business and Management

ISSN: 2183-5594

DOI: https://doi.org/10.58869/EJABM

Indexing:

EBSCO | CROSSREF | GOOGLE SCHOLAR | LATINDEX | DRJI | ICI JOURNALS MASTER | REDIB | MIAR