Effect of Foreign Direct Investment on Stock Market Development in Selected Sub-Saharan African Countries (1984-2015)


Faculty: Management Sciences
Department: Banking And Finance


Osadume, C. R.
Mbachu, A. U.
Ibenta, S.


This Study examined the Effect of Foreign Direct Investments (FDI) on Stock Market Development (SMD) in Selected Sub-Saharan African (SSA) Countries from 1984 to 2015.FDI increase should result to increase in SMD indicators but some available findings from studies appear to disagree with this proposition.The objective of this study was to examine the Effect of FDI on SMD indicators of the selected SSA Countries. The study used secondary data obtained from World Bank, IMF, Bureau of Statistics and the Central Bank of selected countries; The research work selected Nigeria, South Africa and Kenya as its sample and used the OLS and GLSPanel Data Analysis techniques, to test the Effect of the independent variables (FDI, and Gross domestic product) on the dependent variables (Market Capitalization, Market turnover, Number of listed shares, value of stock traded, All share index) at the 5% level of significance. The findingsamongst others show that FDI had a significant effect on market capitalization in Nigeria and South Africa but insignificant effect in Kenya;while the SSA countries’pooled panel resultindicatethat FDI had a positive and significant effect on market capitalization. This result implies that 1% increase in FDI will result to 1.7048% increase in market capitalization. Thestudy concludes that FDI affects SMD indicators and hence, recommends among others the provision of FDI friendly environment and implementation of market-friendly regulations such as reduction in listing requirements that will enable FDI benefiting Multinational companies (MNCs) to be listed on the stock exchange.