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Political Regimes and Stock Market Performance in Africa

Author

Listed:
  • Simplice Asongu

    (Yaoundé/Cameroun)

  • Jacinta C. Nwachukwu

    (Coventry University)

Abstract

This paper assesses the effect of political institutions on stock market performance in 14 African countries for which stock market data is available for the period 1990-2010. The estimation technique used is a Two-Stage-Least Squares Instrumental Variable methodology. Political regime channels of democracy, polity and autocracy are instrumented with legal-origins, religious-legacies, income-levels and press-freedom qualities to account for stock market performance dynamics of capitalization, value traded, turnover and number of listed companies. The findings show that countries with democratic regimes enjoy higher levels of financial market development compared to their counterparts with autocratic inclinations. As a policy implication, the role of sound political institutions has important effects on both the degree of competition for public office and the quality of public offices that favour stock market development on the African continent.

Suggested Citation

  • Simplice Asongu & Jacinta C. Nwachukwu, 2016. "Political Regimes and Stock Market Performance in Africa," Working Papers of the African Governance and Development Institute. 16/012, African Governance and Development Institute..
    • Handle: RePEc:agd:wpaper:16/012
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance

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