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Does institutional quality accelerate the growth of financial markets in Africa?

Author

Listed:
  • Bruno Emmanuel Ongo Nkoa

    (University of Yaounde II)

  • Thierry Mamadou Asngar

    (University of Ndjamena)

  • Charles Christian Atangana Zambo

    (University of Yaounde II)

  • Donald Ferdinand Okere Atanga

    (University of Dschang)

Abstract

In this paper, we investigate the effect of political and legal institutions on the growth of financial markets in 50 African countries over the period 1996–2016. Using the system generalized methods of moment strategy, we find that in Africa, financial market growth is explained by the quality of political and legal institutions. High levels of political constraints on the executive and protection of investors' rights result in improved performance of these markets. The results further reveal that political instability and corruption reduce the performance of political and legal institutions, eroding the African financial market’s performance, thereby constraining their growth. These results are consistent with several tests conducted. As a policy recommendation, governments should strengthen their political and legal institutions. This can be done through the adoption of anti-corruption measures and strong political stability.

Suggested Citation

  • Bruno Emmanuel Ongo Nkoa & Thierry Mamadou Asngar & Charles Christian Atangana Zambo & Donald Ferdinand Okere Atanga, 2023. "Does institutional quality accelerate the growth of financial markets in Africa?," SN Business & Economics, Springer, vol. 3(4), pages 1-26, April.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:4:d:10.1007_s43546-023-00460-1
    DOI: 10.1007/s43546-023-00460-1
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    More about this item

    Keywords

    Financial markets; Institutional quality; Africa; GMMs;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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