ABSTRACT
The issue of whether market development has any direct impact on economic growth has/is still been debated in academic literature.
Earlier research in this area of finance had emphasized the role of the banking sector in economic growth; however,
the recent surge in capital markets activities with emerging markets like Nigeria accounting for a large amount of this boom has led to focus on the linkage between capital markets development and economic growth especially on its impact on the real sectors of these economies.
The real sector of an economy is where goods and services are produced through the combined utilization of raw materials and other production factors such as labor, land, and capital and it comprises the agricultural, industrial, building and construction, and services sector of an economy.
In Nigeria, despite the opportunities which the capital provides through the provision of surplus funds, the growth of the real sector of the Nigerian economy has remained stunted.
Problems such as the inaccessibility of by real sector firms from the capital market due to stringent listing requirements and conditionalities,
lack of depth and breadth of the capital market to cater to the need of real sector firms among other challenges, have been attributed as major factors inhibiting the growth of the real sector of the Nigerian economy.
It is against this background, therefore, that this sought to appraise and analyze the impact of the new issues market, market capitalization, turnover ratio, and value of share traded ratio of the Nigerian capital market on the real sector of the Nigerian economy.
The study adopted the ex-post facto research and annualized cross-sectional data for a 24-year period, 1987-2010, were collated from the Nigerian Stock Exchange Fact Books for the period.
Four hypotheses were proposed and tested and descriptive statistics and graphs were also used to complement the regression results.
The results from this study found that the new issues market of the Nigerian capital market has a positive and significant impact on agricultural output (coefficient of NIR = 0.04, t-value = 5.13; p = 0.00 < 0.05) but negative and significant on industrial output (coefficient of NIR = -0.05, t- value = -5.03; p = 0.00 < 0.05).
Market capitalization has positive and significant impact on agricultural output (coefficient of Mcap = 0.01, t-value = 3.96; p = 0.00 < 0.05) but had negative and significant impact on industrial output (coefficient of Mcap = -0.01, t-value = -6.98; p = 0.00 < 0.05).
Turnover ratio of the Nigerian capital market had positive and significant impact on agricultural output (coefficient of TVR = 0.68, t-value = 7.07; p = 0.00 < 0.05) but negative and significant impact on industrial output (coefficient of TVR = -0.59, t-value = -4.47; p = 0.00 < 0.05).
And value of share traded ratio of the Nigerian capital market had positive and significant impact on agricultural output (coefficient of VSTR = 0.058, t-value = 5.55; p = 0.00 < 0.05) but negative and significant impact on industrial output (coefficient of VSTR = -0.0619, t-value = – 5.77; p = 0.00 < 0.05).
The study, therefore, amongst others recommends that policies that will impact positively on the real sector,
especially the agricultural and manufacturing subsectors of the Nigerian economy where it concerns funding, should be pursued with all the seriousness it deserves if Nigeria is to achieve her desire to be one of the top twenty economies in the world by the year 2020.
Therefore, this study contributed, empirically to provide evidence on the impact of the capital market on the real sector of the Nigerian economy.
TABLE OF CONTENTS
Title Page. . i
Declaration. .. ii
Approval Page. iii
Dedication. iv
Acknowledgments. v
Abstract. vii
List of Tables. . xii
List of Figures. xiii
List of Appendixes. . xiv
CHAPTER ONE INTRODUCTION
- Background of the . . 1
- Statement of the . . 7
- Objectives of the . . 9
- Research . . 9
- Research . . . 10
- Scope of the . . 10
- Significance of the .. 11
References. 13
CHAPTER TWO REVIEW OF RELATED LITERATURE
- Theoretical . . 17
- Overview of the Nigerian Capital . . 17
- The Role of the Capital Market in . . 18
- Development of the Nigerian Capital . . 20
- Contribution of the Capital Market to Economic Development of. 24
- Financing Government’s Infrastructural . . . . 25
- Privatization of State-Owned Enterprises (SOEs). . 26
- Bank Re-capitalization and Consolidation in . . . 27
- Analysis of the Nigerian Capital market . . . 27
- Total New . . 27
- Market . . . . 28
- Listed . . 28
- Value of . . 28
- Empirical . . 29
- The Link between Capital Market Development and . . 29
- Equity Markets and . . . . . . . 31
- Macroeconomic Determinants of Stock Market . . 37
- The Real and the Financial Sector of a Monetary Production. 42
- The Stock Market and Capital . . . . 52
- Stock Market Liberalizations and Investment. . . . . 57
- Causality Model on Stock Market Development and Economics. 59
- Stock Markets, Banks, and Growth: Correlation or . . 63
- Relationship between Macroeconomic Variables and Stock Market Indices. 67
- The New Issue or Initial Public Offer Effect and Measurement of. 73
- Aggregate Economic Variables and Stock Markets . . . . 75
- Capital Market Growth and Information . . . 79
- Stock Market Development and Internationalization. . . . 85
- Law, Finance and Firm Growth . . . 80
- Stock Market Volatility and Economic . . . 91
- Nature, Relevance, and Challenges of the Agricultural Sector in. 91
- Nature, Relevance, and Challenges of the Manufacturing Sector in. 93
- Summary of Review of Related 96
References 97
CHAPTER THREE METHODOLOGY
- Research . . 116
- Nature and Sources of. 116
- Area of. 117
- Model . . 117
3.4.1 Models. 117
3.4.2 Assumptions. . 119
- Description of Explanatory. 119
- Dependent Variable. 119
- Independent . . 120
- Model . . . . 122
- Techniques of Analysis. . . 124
References. . 126
CHAPTER FOUR PRESENTATION AND ANALYSIS OF DATA
- Presentation of. 129
- Test of . . 143
- Test of Hypothesis . . 143
- Test of Hypothesis . . . 146
- Test of Hypothesis . . 148
- Test of Hypothesis . . 150
- Discussion of . . 152
- New Issue Market and the Real Sector of the Nigerian . . 152
- Market Capitalization and the Real Sector of the Nigerian. 153
- Turnover Ratio and Real Sector of the Nigeria Capital . . 155
- Value of Shares Traded and Real Sector of the Nigeria . . 155
References. 157
CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION, AND RECOMMENDATIONS
5.1 Summary of Findings.. 158
5.2 Conclusion. 158
- Recommendations for Further . . 161
Appendixes. 163
Abbreviations.. 170
Bibliography. . 171
INTRODUCTION
1.1 Background of the Study
The issue of whether capital market development has any direct impact on economic growth has been debated in the academic literature. The early proponents of finance-led economic growth include Bagehort (1873), Schumpeter (1911), and Hicks (1969).
Bagehort (1873) and Schumpeter (1911) argue strongly for the important role capital market development plays in promoting economic growth.
They support their claim by arguing that the industrial revolution in England was the result of a functioning capital market that was instrumental in mobilizing and allocating long-term capital to the productive enterprises of the country.
Their position was buttressed by Hick (1969), who argued that a well-functioning banking system provides intermediation services to productive entrepreneurial activities that spur technological, innovative, and productive activities that increase real sector growth.
On the other hand, Robinson (1952) indicates that demand-pull initiatives from the private sector growth have the propensity to spur the financial sector to respond to the financial or capital needs of the private sector.
In her view, real sector developments (growth) and financial needs create the demand for a certain financial structure (equity versus debt) to cater to the needs of the private sector.
Lucas (1988), in support of Robinson’s position, argues that the proponents of finance led growth exaggerate the impact of capital market development on real sector growth.
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