Stock Market Capitalization, Foreign Direct Investment and Stock Market Performance: A Comparative Study of Ghana and Nigeria


Prince Asare Vitenu-Sackey , Richard Barfi , Stephen Oppong ,

Download Full PDF Pages: 79-90 | Views: 881 | Downloads: 276 | DOI: 10.5281/zenodo.3510087

Volume 8 - September 2019 (09)


the study assesses the impact of stock market capitalization and foreign direct investment in stock market performance for the period of 1996 to 2017 in a comparative study of Ghana and Nigeria. The study used both panel and time-series approaches and methodologies such as unit root tests, cointegration tests, vector error correction model, dynamic ordinary least square, generalized least square, multiple linear regression (random and fixed effects) models and granger causality tests to make its statistical inference. The study concludes that stock market capitalization and foreign direct investment have a negative impact on stock market performance in a panel study, but both have positive impact on stock market performance in Ghana and Nigeria respectively. The study recommends further look into the areas for validation


stock market capitalization; stock market performance; foreign direct investment; Ghana; Nigeria


i.        Adam, A. M. and Tweneboah, G. (2008). Foreign Direct Investment (FDI) and Stock Market Development: Ghana Evidence. MPRA Paper, 11261. Available online at

ii.      Adaramola, A. O. &Obisesan, O. G. (2015). Impact of foreign direct investment on Nigerian capital market development. International Journal of Academic Research in Accounting, Finance and Management Science, 5(1):103-108.

iii.    Anfofum, A. A., Gambo, J. S. & Suleiman, T. (2013). Estimating the Impact of Foreign Direct Investment in Nigeria. International Journal of Humanities and Social Sciences 3 (17) 4.

iv.     Arcabic, V., Globan, T. & Raguz, I. (2012). The relationship between the Stock Market and Foreign Direct Investment in Croatia: Evidence from VAR and Cointegration Analysis.

v.       Ayighesi, O. S., Edore, J. O. (2013). Foreign resources inflows and stock market development: Empirical evidence from Nigeria and Ghana. Research Journal of Finance and Accounting 4 (9), 43 – 49.

vi.     Bank of Ghana (2000). The role of Non-residenet foreign investors on the Ghanaian capital market. Avaialable at:

vii.   Baker, M., Foley, F. C. & Wurgler, J. (2004). The Stock Market and Investment: Evidence from FDI Flows. The National Bureau of Economic Research, Working Paper 10559 (8).

viii. Claessens, S., Klingebiel, D. & Schmukler, L. S. (2001). FDI and Stock Market Development: Complements or Substitutes? Joint Conference of the IDB and the World Bank: The FDI Race: who gets the Prize? Is it Worth the Effort?

ix.     Dunning, J. H. (1973). The determinants of international production. Oxford Economic Papers 25 (7).

x.       Ghana Stock Exchange (August, 2018). Market Report. Available at:

xi.     Henry, P. B. (2000). Do Stock Market Liberalization Cause Investment Booms? Journal of Financial Economics 58(1-2), 301 – 334.

xii.   Im, K.S., Pesaran, M.H., Shin, Y., 2003. Testing for unit roots in heterogeneous panels. Journal of Econometrics 115, 53 – 57.

xiii. Kao, C., 1999. Spurious regression and residual-based tests for cointegration panel data. Journal of Econometrics 90 (1), 1 – 44.

xiv. Kao, C., Chiang, M.H., 2000. On the estimation and inference of a cointegrated regression in panel data. Advanced Econometrics 15, 179 – 222.

xv.   Kaleem, R., Shahbaz, M. (2009). Impact of Foreign Direct Investment on Stock Market Development: The Case of Pakistan. 9th Global Conference on Business and Economics, Cambridge University, UK.

xvi. Kim, Y. H., Jose Y., Jimmy, Y. J. (2008). Relative performance of trading halts and price limits: Evidence from the Spanish stock exchange. International Review of Economics and Finance 17, 197 – 215

xvii.           Levin, A., Lin, C.F., Chu, C., 2002. Unit root tests in panel data: asymptotic and finite sample properties. Journal of Econometrics 108, 1 – 24.

xviii.         Mika’ilu A., Yanusa, U. D. (2018). Foreign direct investment and stock market development in Nigeria: Evidence from ARDL bound test approach to cointegration. IOSR Journal of Economics and Finance 9 (1) II, 79 – 85.

xix. Musa, A., Ibrahim, Y. (2014). Stock Market Development, Foreign Direct Investment and Macroeconomic Stability: Evidence from Nigeria. Research Journal of Finance and Accounting, 5(8), 2 - 7.

xx.   Oke, M. O. (2012). Foreign Direct Investment and the Nigerian Financial Sector Growth. Asian Economic and Financial Review 2 (2), 262 - 275.

xxi. Olowe, O., Mathew, O. &Fasina, F. (2011). Nigeria Stock Exchange and Economic Growth. Covenant University, Nigeria, Knowledge management elibrary, No.14, 2011

xxii.           Oseni, I. O., Enilolobo, O. S. (2011). Effect of Foreign Direct Investment and Stock Market Development on Economic Growth in Nigeria (1980-2009). European Journal of Business and Management, 3(12): 3- 6.

xxiii.         Nigerian Stock Exchage (2019). NSE Q1 fact sheet 2019. Available at site/NSE%20Fact%20Sheet/Q1%20Fact%20Sheet%202019.pdf

xxiv.          Parthapratim P. (2006). Foreign portfolio investment Stock market and economic development: A case study of India. Draft paper submitted for the Annual conference of Development and Change mission promoting development in a globalized world.

xxv.            Pedroni, P., 1999. Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics 61, 53 - 70.

xxvi.          Pedroni P., 2004. Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis: New results. Economic Theory 20, 597 – 627.

xxvii.        Raza, A., Iqbal, N., Ahmed, Z., Ahmed, M., Ahmed, T. (2012). The Role of FDI on Stock Market Development: The Case of Pakistan. Journal of Economics and Behavioural Studies, 26-33.

xxviii.      Richard, O., Felicia, A. A. (2018). Foreign direct investments and development of stock market capitalization in Sub-Saharan Africa: An empirical Investigation, 1984 – 2015. IOSR Journal of Business and Management 6 (I), 64 – 80.

xxix.          Sawe, Benjamin Elisha. (2017, April 25). Lowest Stock Turnover Ratios By Country. Retrieved from

xxx.            Singh, A. &Weisse, B. A. (1998).Emerging Stock Markets, Portfolio Capital Flows and Long-term Economic Growth: Micro and Macroeconomic Perspectives. World Development Journal 26 (4), 607- 622.

xxxi.          Soumare, I. and Tchana, F. M. (2011). Causality between FDI and Financial Market Development: Evidence from Emerging Markets. Available online at SSRN: or Todaro, M. P. and Smith, S. C. (2003).

xxxii.        Zafar, H., Qureshi T. M. & Abbas, Z. (2013). Does Foreign Direct Investment Influence Development of Stock Market of Host Country? Evidence from Pakistan. African Journal of Business Management 7(9), 678 – 687.

Cite this Article: