Factors affecting the development of emerging capital markets
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Date
2011Author
Chepkoiwo, Nicholas K
Type
ThesisLanguage
enMetadata
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This study examines the factors affecting the development of emerging capital marketsthe
case of Nairobi Stock Exchange. The study covered the period 2005-2010 on all listed
companies in NSE. However, despite various measures instituted by the government at
different times, performance indicators show a relative poor performance of the NSE
compared to other emerging stock markets. These include: low turnover ratio, low market
capitalization to GDP ratio and low value of stock traded to GDP ratio. This study was
therefore designed to identify factors affecting the development of emerging stock
markets-The case of Nairobi Stock Exchange.
A case study design was used at finding out the factors affecting the development of an
emerging Capital market. However, descriptive and regression approach was used in data
analysis and secondary data collection method was used. The study establishes both the
external (macro economic and social cultural factors) and market (legal, regulatory and
Institutional) factors which have constrained the development of the Stock Market.
However, there are some variables which didn’t clearly show the above relationship,
namely macroeconomic stability-inflation and private capital inflows. It can therefore be
concluded that stock market development is determined by stock market liquidity,
institutional quality, income per capita, domestic savings and bank development.
Using the regression analysis, the study established that 85% of stock market
development is determined by: stock market liquidity, institutional quality, income per
capita, macroeconomic stability-inflation, domestic savings and private capital flows and
bank development. The study recommends NSE needs to be developed further to enhance
domestic resource mobilization. Various policies and programs that affect stock market
development such as regulation of institutional investor and privatization need to be
addressed. The policy makers should consider reducing impediments to stock market
development by easing restrictions on international capital flows. NSE should play an
increasingly educational role and CMA should also change its approach from heavy
handed type to more productive.
Citation
MBA ThesisSponsorhip
University of NairobiPublisher
School of Business, University of Nairobi