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Stock Market Development in Sub-Saharan Africa; Critical Issues and Challenges

  • Charles Komla Adjasi
  • Charles Amo Yartey
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    This paper examines the economic importance of stock markets in Africa. It discusses policy options for promoting the development of the stock market in Africa. The results of the paper show that the stock markets have contributed to the financing of the growth of large corporations in certain African countries. An econometric investigation of the impact of stock markets on growth in selected African countries, however, finds inconclusive evidence even though stock market value traded seem to be positively and significantly associated with growth. African stock exchanges now face the challenge of integration and need better technical and institutional development to address the problem of low liquidity. Preconditions for successful regional approaches include the harmonization of legislations such as bankruptcy and accounting laws and a liberalized trade regime. Robust electronic trading systems and central depository systems will be important. Further domestic financial liberalization such as steps to improve the legal and accounting framework, private sector credit evaluation capabilities, and public sector regulatory oversight would also be beneficial.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21233
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/209.

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    Length: 33
    Date of creation: 01 Aug 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/209
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    1. Singh, Ajit, 1997. "Financial Liberalisation, Stockmarkets and Economic Development," Economic Journal, Royal Economic Society, vol. 107(442), pages 771-82, May.
    2. Whittington, G & Saporta, V & Singh, A, 1997. "The Effects of Hyper-Inflation on Accounting Ratios. Financing Corporate Growth in Industrial Economies," Papers 3, World Bank - International Finance Corporation.
    3. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
    4. Kenny, Charles J. & Moss, Todd J., 1998. "Stock markets in Africa: Emerging lions or white elephants?," World Development, Elsevier, vol. 26(5), pages 829-843, May.
    5. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Market Development and Financial Intermediaries: Stylized Facts," World Bank Economic Review, World Bank Group, vol. 10(2), pages 291-321, May.
    6. Singh, A., 1995. "Corporate Financial Patterns in Industrializing Economies. A Coparative International Study," Papers 2, World Bank - International Finance Corporation.
    7. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
    8. Demirguc-Kunt, Ash & Maksimovic, Vojislav, 1996. "Stock Market Development and Financing Choices of Firms," World Bank Economic Review, World Bank Group, vol. 10(2), pages 341-69, May.
    9. Bhide, Amar, 1993. "The hidden costs of stock market liquidity," Journal of Financial Economics, Elsevier, vol. 34(1), pages 31-51, August.
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