Tweet

VI. C. Institutional Quality: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?

Guest post by: International Monetary Fund

Article Overview: Institutional quality is important for stock market development because efficient and accountable institutions tend broaden appeal and confidence in equity investment.

VI. C. Institutional Quality: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?

Institutional quality is important for stock market development because efficient and
accountable institutions tend broaden appeal and confidence in equity investment. Equity
investment thus becomes gradually more attractive as political risk is resolved over time.
Therefore, the development of good quality institutions can affect the attractiveness of equity
investment and lead to stock market development. Yartey (2007a) finds good quality
institutions such as law and order, democratic accountability, bureaucratic quality as
important determinants of stock market development in Africa because they reduce political
risk and enhance the viability of external finance. Bekaert (1995) provides evidence that
higher levels of political risk are related to higher degrees of market segmentation and
consequently low level of stock market development. Erb et al (1996a) show that expected
returns are related to the magnitude of political risk. They find that in both developing and
developed countries, the lower the level of political risk, the lower is required returns. The
evidence in the literature suggests that political risk is a priced factor for which investors are
rewarded and that it strongly affects the local cost of equity, which may have important
implications for stock market development.

IMF Working Paper
African Department
Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges
Prepared by Charles Amo Yartey and Charles Komla Adjasi
August 2007

Related Articles
  VII D. Promote Institutional Investors: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA
  VI. B. Banking Sector Development: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  VI. A. Macroeconomic Stability: WHAT DETERMINES STOCK MARKET DEVELOPMENT IN AFRICA?
  Introduction: Stock Market Development in Sub-Saharan Africa
  VIII. SUMMARY AND CONCLUSION: Stock Market Development in Sub-Saharan Africa

Article Tags: amo, attractiveness, confidence, cost of equity, critical issues, democratic accountability, determinants, developed countries, equity investment, external finance, imf, institutional quality, law and order, magnitude, market segmentation, political risk, quality institutions, stock market development, sub saharan africa, viability



Related Forum Posts
Re: Hello from South Africa - you are welcome to the forum of achievers.its great to have you here,i also reside in SOUTH AFRICA.
Re: What makes a good sales rep? - Quality of a good salesman. Believe in yourself Know your product like the back of your hand Resufe to take no for an answer Be passionable about your product
Re: June Contest Winners, New July Contest! - You are doing great things in this forum. This forum is the first one that will reward pepole posting. My hobby is writing and this will gear me to write more for this forum. Quality post that will benefit members. Thanks for this contest
Re: Search Engine Optimization Guide for All - I see...[i:dvipfcie]Quality[/i:dvipfcie] content wins every time, as the saying goes. Thanks for the resource. It looks like a great site and Higher quality then some that i've seen so far. I will [u:dvipfcie]definately[/u:dvipfcie] use them soon.
Re: New McDonalds McCafe concept... - Well.. it's probably not fair to contrast Japan work practices to the US. Their culture is so different over there - they have a much higher regard for doing things right, don't they? It's no accident that most of the Quality Assurance systems came out of Japan! I lived in Japan for a year... about five years ago. Of course I was in Misawa and never got to the big city of Tokyo...


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Life, Conflict and Work

Think Time

Common Sense Stress Management

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.