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 57
- Downloads 0
FAIR VALUE MEASUREMENT HIERARCHY AND COSMETIC ACCOUNTING IN THE NIGERIAN DEPOSIT MONEY BANKS
The study investigated the effect of fair value financial instruments measurements hierarchy disclosures on cosmetic accounting practices in the Nigerian DMBs, given the possibility of managerial discretion to manipulat...
FAIR VALUE UNOBSERVABLE INPUTS ON THE VALUE RELEVANCE OF LISTED DEPOSIT MONEY BANKS (DMBs) IN NIGERIA
This study addressed the influence of fair value of unobservable inputs on the interrelationship between the value relevance of listed DMBs in Nigeria. The sample is comprised of ten (10) listed deposit money banks (DMB...
DETERMINANTS OF SOCIAL AND ENVIRONMENTAL ACCOUNTABILITY OF NIGERIAN FIRMS
Corporate organisations are following legal and illegal means to avoid and evade payment of corporate taxes considered as corporate burdens that erode profits as the main motive of businesses. Conversely, activities of...
AUDIT QUALITY, TENURE AND REAL EARNINGS MANAGEMENT OF LISTED NONFINANCIAL FIRMS IN NIGERIA
Earnings management is volatile due to its asymmetric nature by managers of non-financial firms. Yet, very few studies have examined the issues that cause this manipulation, especially in non-financial firms. This study...
BOARD MECHANISMS AND ENVIRONMENTAL DISCLOSURE QUALITY OF LISTED OIL AND GAS FIRMS IN NIGERIA
This study investigates the impact of board mechanism on environmental disclosure quality in Nigeria. Content analysis was employed on annual reports of seven listed oil and gas companies on Nigerian Stock Exchange over...