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Stock market development, banks and firms growth: empirical evidence from Saudi Arabia

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  • Najeb Masoud
  • Glenn Hardaker

Abstract

This study provides new and updated empirical investigation on the effect of stock market development, banks development and firms growth using Saudi Arabia industrial firm-level data set for the period 1995-2013 and applying GMM, MG techniques model developed for dynamic panels. The econometric results reveal that with more development in the stock market firms that use equity finance heavily grow faster than firms that do not. These findings provide firm-level support for the proposition that the development of the stock market facilitates economic growth in Saudi Arabia. Our results also show that both the stock market and the banking sector development are significant in facilitating the firm's growth in Saudi Arabia. In particular, we find that measures of both market and banking development independently predict firm's growth when entered together in firm growth regressions. The results are consistent with the hypothesis that the stock market and the banking sector development have different effects on small and large firms.

Suggested Citation

  • Najeb Masoud & Glenn Hardaker, 2014. "Stock market development, banks and firms growth: empirical evidence from Saudi Arabia," American Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 3(2/3/4), pages 185-216.
    • Handle: RePEc:ids:amerfa:v:3:y:2014:i:2/3/4:p:185-216
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    Cited by:

    1. Haitham Nobanee & Nejla Ould Daoud Ellili & Jaya Abraham, 2017. "Equity Concentration, Agency Costs and Performance of Non-financial Firms Listed on the Saudi Stock Exchange (Tadawul)," Global Business Review, International Management Institute, vol. 18(2), pages 379-387, April.
    2. Offum, Peter F. & Ihuoma, Chikulirim E., 2018. "CAPITAL MARKET AND INDUSTRIAL PERFORMANCE NEXUS: Empirical Evidence from Nigeria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 60(3), pages 1-16.

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