Does the Structure of SSA Economies Explain Their Low Stock Market Capitalization and Small Number of Listed Companies? A Dynamic Panel Analysis

Abstract

Excluding South Africa, the number of listed firms and stock market capitalization in Sub-Saharan Africa (SSA) has remained relatively low and practically static. This study develops and tests a theoretical model using a dynamic panel analysis. Increases in the agricultural and service sectors have slight adverse effects on the number of listed companies. Industry and services are found to have a positive influence on market capitalization. In contrast, the externality and network effects of the service sector negatively influences capitalization. Both capitalization and number of listed firms have a dynamic relation with their past values. The results suggest that number of listed firms may be less sensitive to market variables.

Keywords: Stock market, Sub-Saharan Africa, Structure of the economy.

JEL: E44, G10, O16.