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Effectiveness of legal institutions in stock market development in sub-Saharan Africa

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  • Olufemi Adewale Aluko

    (University of Ilorin)

  • Bolanle Aminah Azeez

    (Ekiti State University)

Abstract

The law and finance theory posits that legal institutions are associated with stock market development. We examine the effectiveness of legal institutions in stock market development in 11 countries in sub-Saharan Africa for the period 2000–2014. Based on the two-stage least squares estimator, we find that the effectiveness of legal institutions does not promote stock market development in sub-Saharan Africa, after controlling for income, banking sector development, inflation, endowments, capital account liberalization, culture, and democracy. We provide empirical support for the law and finance theory by establishing that legal institutions explain cross-country differences in stock market development in sub-Saharan Africa.

Suggested Citation

  • Olufemi Adewale Aluko & Bolanle Aminah Azeez, 2019. "Effectiveness of legal institutions in stock market development in sub-Saharan Africa," Economic Change and Restructuring, Springer, vol. 52(4), pages 439-451, November.
    • Handle: RePEc:kap:ecopln:v:52:y:2019:i:4:d:10.1007_s10644-018-9233-x
    DOI: 10.1007/s10644-018-9233-x
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    More about this item

    Keywords

    Legal institutions; Stock market development; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • K15 - Law and Economics - - Basic Areas of Law - - - Civil Law; Common Law
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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