Stock Market Development and Economic Performance of West-African Countries: A Dynamic Panel Data Analysis

Abstract

The nexus between development of stock market and the performance of economic activities have been a critical issue around the globe. The issue as to whether a well-developed stock market influences the performance of economic activities and the relevant of developmental policy strategies have been a concern for the developing economies especially the West Africa economies. Literatures have shown that most of the West Africa economies were faced with sharp swings and wide fluctuations in the stock market indices, which had negative effect on the performance of economic activities of these economies. This study examined the effect of stock market development on the economic performance among West Africa economies. The study employed secondary data subjected to panel regression method of analysis within the period of seven years across selected West-Africa countries. Findings revealed that stock market development indicators; ratio of market capitalization to gross domestic product, All Share Index, and Stock Turnover have positive effect on economic performance while corruption perception index have negative effect on economic performance, all at 5% level of significance. The study concludes that stock market development indicators and corruption index affect economic performance in West Africa. Therefore, the study recommends that the stock market regulatory authorities should initiate strategic policies that would boost market liquidity and encourage easy access of companies to the market and also be more proactive in surveillance role in order to check unethical practices which undermine stock market integrity, erode investors’ confidence and patronage.