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Foreign divestment, financial development, and economic growth nexus in selected African countries: Autoregressive Distributed Lag (ARDL) Approach

Author

Listed:
  • Refilwe Maduane-Komape

    (University of South Africa)

  • Makgopa Tshehla

    (University of South Africa (UNISA))

Abstract

There is a limited amount of literature and data available on the topic of foreign divestment in African countries. The majority of research examining international divestment have primarily concentrated on a single-country context and have utilised factors at the level of individual firms. Unlike other papers, this study took a comprehensive approach by examining foreign divestiture across multiple countries on a continental scale. We analyse the correlation between foreign divestment, financial development, and economic growth over both short and long periods using annual data from 2000 to 2020 in 35 African nations. The principal estimating technique employed was the autoregressive distributed lag (ARDL) co-integration approach. The study's primary findings revealed a favourable enduring correlation between foreign divestiture and financial development, while indicating an unfavourable enduring correlation between foreign divestment and economic growth. Furthermore, the study found that there is a negative correlation between international divestiture and financial development in the short term. On the other hand, there is a positive and significant correlation between foreign divestment and economic growth. Thus, it is imperative for policymakers to implement rules with efficiency and promote foreign direct investment (FDI) inflows in order to enhance economic growth and development in African countries. Additionally, it is imperative for authorities to establish a surveillance system to monitor these connections and adapt policy accordingly in light of evolving economic conditions. The results of this study will not only enhance scholarly discussions, but also offer valuable insights to policymakers, practitioners, businesses, and foreign investors on how to effectively execute policies that promote economic growth and foreign investment in Africa. Moreover, this study provides suggestions for future investigations in the field of foreign divestment. Key Words:foreign divestment, economic growth, financial development, ARDL

Suggested Citation

  • Refilwe Maduane-Komape & Makgopa Tshehla, 2024. "Foreign divestment, financial development, and economic growth nexus in selected African countries: Autoregressive Distributed Lag (ARDL) Approach," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 13(3), pages 233-247, April.
    • Handle: RePEc:rbs:ijbrss:v:13:y:2024:i:3:p:233-247
    DOI: 10.20525/ijrbs.v13i3.3238
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    References listed on IDEAS

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    1. Emeka Nkoro & Aham Kelvin Uko, 2016. "Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 5(4), pages 1-3.
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    Cited by:

    1. Vincent M. M. Moloi, 2024. "The threshold analysis of the Official Development Assistance (ODA), Foreign Direct Investment (FDI), and economic growth in selected African countries," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 13(5), pages 558-570, July.

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