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Banks versus markets: Do they compete, complement or Co-evolve in the Nigerian financial system? An ARDL approach

Augustine Arize, Ebere Ume Kalu and Nelson N. Nkwor

Research in International Business and Finance, 2018, vol. 45, issue C, 427-434

Abstract: A long-standing debate about the financial structure of an economy has concerned the superiority of banks or capital markets as well as at what stage of economic development either plays a dominant role in an economy. More recently, there has been a paradigm shift in the debate, from superiority to the interplay between banks and markets in a financial system − whether they compete or complement each other. This paper explores the association between banks and stock markets, whether they are foes or friends in the Nigerian financial system. Using autoregressive distributed lag model Bounds testing technique on annual data obtained from the Central Bank of Nigeria Bulletin, we find a long-run link between bank models and market models– a complementary rather than a competing association, which suggests a co-evolving development in the Nigerian financial structure. We therefore recommend that efforts should be geared toward action-based approaches in the development of both the Nigerian banking system and capital markets for a rapid development in the financial system, which drives economic growth.

Keywords: Financial system; Financial structure; Bank-Based-; Market-Based economy; Nigeria (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.ribaf.2017.07.174

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