Political Regimes and Stock Market Performance in Africa

Political Studies Review, 16(3) 240–249 (July, 2018).

19 Pages Posted: 11 Jun 2016 Last revised: 21 Jul 2018

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Jacinta Nwachukwu

University of Huddersfield - Business School

Date Written: January 8, 2016

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.

Keywords: Financial Markets; Government Policy; Development

JEL Classification: G10; G18; G28; P16; P43

Suggested Citation

Asongu, Simplice and Nwachukwu, Jacinta C., Political Regimes and Stock Market Performance in Africa (January 8, 2016). Political Studies Review, 16(3) 240–249 (July, 2018).. Available at SSRN: https://ssrn.com/abstract=2792273 or http://dx.doi.org/10.2139/ssrn.2792273

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Jacinta C. Nwachukwu

University of Huddersfield - Business School ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

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