FINANCIAL DEEPENING, STOCK MARKET RETURNS AND LIQUIDITY MANAGEMENT IN NIGERIA
Journal Title: Gusau Journal of Accounting and Finance - Year 2021, Vol 2, Issue 2
Abstract
The capital market is an engine room of economic growth but the extent to which financial deepening influences this institution (capital market) that spur economic advancement of the country is still blurred and subject to debate among researchers. Therefore, this study investigates the causal relationship and impact of three financial deepening indicators on stock market returns and liquidity in Nigeria for the period 1985-2018. The study adopts correlational research design and obtains secondary annual time series data from the Central Bank of Nigeria statistical bulletin. The two-stage least squares regression and pairwise Granger causality test are methods of data analysis used. Findings reveal that financial deepening indicators-the ratio of money supply to gross domestic product, and market capitalization as a ratio of Gross Domestic Product (market capitalization ratio) have positive significant effect on stock market liquidity while ratio of credit to private sector to Gross Domestic Product, though positive but is not significantly related with market liquidity in Nigeria. Empirical findings also reveal that, though, the three financial deepening indicators are positively signed with stock market returns, only market capitalization ratio is found to exert significant effect on the stock market returns in Nigeria. Moreover, stock market liquidity is found to granger-cause financial deepening while a bi-directional causality exists between stock market returns and stock market deepening. Using multivariate modelling approach, this study contributes to financial deepening-stock market nexus literature by emphasizing the positive impact of three different financial deepening indicators on stock market performance in terms of returns and liquidity. This study concludes that financial deepening is a catalyst to capital market performance in Nigeria and therefore recommends that Government of Nigeria should further deepen the financial sector and its synergistic effect on capital market.
Authors and Affiliations
Gbenga Festus Babarinde, Kenneth Ogbeide Enoruwa
Keywords
Related Articles
- EP ID EP709147
- DOI -
- Views 45
- Downloads 0
ENVIRONMENTAL ACCOUNTING DISCLOSURE PRACTICES AND FINANCIAL PERFORMANCE OF LISTED CEMENT COMPANIES IN NIGERIA
This study examined the impact of environmental accounting disclosure on financial performance of listed cement companies in Nigeria. The study employed expo facto research design. Data were sourced from three annual rep...
FIRM-SPECIFIC CHARACTERISTCS AND FINANCIAL PERFORMANCE OF LISTED AGRICULTURAL COMPANIES IN NIGERIA
The contribution of listed agricultural firms to market development and economic growth has been consistently low in recent years. This could be traced partly to low profitability of agricultural firms in the country wh...
GOVERNMENT BUDGET DEFICITS AND MACROECONOMICS VARIABLES: NIGERIA EXPERIENCE
Over the years the federal government of Nigeria's budget has been in deficit and this has been receiving attention as regards its effect on the economy and other macroeconomic variables in Nigeria. The study, therefore,...
DO FINANCIAL AUDITORS’ INDEPENDENCE INFLUENCE THE PORTFOLIO PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA?
The study examines the impact of financial auditors’ independence on the portfolio performance of Deposit Money Banks (DMBs) in Nigeria. The study uses financial audit fees, financial auditor’s rotation and financial au...
INTERNAL CONTROL SYSTEM EFFECTIVENESS AND FRAUD PREVENTION INNIGERIAN DEPOSIT MONEY BANKS
Over the years, there has been an emphasis not only on the presence of internal control system in the banking sector but also the efficiency of internal control. There is possibility for internal control unit to be prese...