Does Cryptocurrency Hurt African Firms?

Abstract

This paper aims to assess the effect of the cryptocurrency market on the firms' market value, especially on the sectoral level in Africa. To reach the study's main goal, the authors adopted the Panel Corrected Standard Errors (PCSE) and Panel Double Clustered Standard Errors (PDCSE). Using firm-level data, the results of this study can be summarized as follows: (a) Cryptocurrency market hurts the firm market value in Africa. (b) The firms operating across different sectors respond disproportionally to the cryptocurrency market. For instance, the sectors that offer low returns in Africa (Industrials, Energy, Financials) negatively respond to the cryptocurrency market. While the sectors that offer high returns (Real Estate and Information Technology) are not significantly affected. (c) The cryptocurrency market has a perverse effect on less experienced and highly indebted firms. (d) The consistent policies of governments to ban cryptocurrency did not work efficiently.

Keywords: Africa, Cryptocurrency, Bitcoin, Firms

JEL Classification: B26, G11, G32