Securities Market Development, Bank Industry Performance, Government Regulations and Economic Growth in the Common Market for Eastern and Southern Africa Member States

Abstract

The Common Market for Eastern and Southern Africa was majorly founded to raise the living standards of citizens of member states by promoting joint development in economic activities to stimulate economic growth. The objective has remained elusive over the years. The infrastructure that promotes economic growth in the trading bloc needed to be understood and managed well. Many scholars have reasoned that securities market development facilitates efficient allocation of resources and investors’ access to financial resources that stimulate economic growth. Bank Industry Performance and Government Regulations are important macroeconomic variables that were expected to be conduits that influenced the association between securities markets development and economic growth in terms of how financial resources were accumulated and allocated to various sectors of the economy within COMESA. The purpose of this paper was to investigate the effect of Bank Industry Performance and Government regulations on the relationship between securities market development and economic growth of COMESA member states. The study’s design was a longitudinal descriptive design for the period between 2005 and 2020. The study utilized panel data from nine COMESA and an econometric model of four indicators: stock market capitalization, the stock traded value for securities market development, ease of doing business index (score) for government regulations; Credit to Private Sector, Interest earned and size of commercial banks for Bank industry Performance while real GDP growth rate measured economic growth, with fixed effects model and the Pooled Ordinary Least Squares as a discussion estimators. The study found that whereas government regulations positively influenced the association between securities market development and the economic growth of COMESA, Bank industry performance had an insignificant effect on the relationship between the two variables. The study concludes that security market development promotes economic growth and government regulations are strong macroeconomic factors that can be applied to directly determine the level of the relationship between securities market development and economic growth. The study contributes to knowledge by availing evidence about the effects of bank industry performance and government regulations on the link between securities market development and economic growth of COMESA member states where there has been limited empirical literature. The study recommends that COMESA member states should put in place strong and investor-friendly government regulations earmarked at making the securities markets efficient and more attractive to investors to promote economic growth in the trading bloc.