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Bank-Based versus Stock Market-Based Development in Nigeria: A Fully-Modified Ordinary Least Squares Approach

Samuel Orekoya, Joseph Afolaby and Oluwatoyin Akintunde

The Review of Finance and Banking, 2021, vol. 13, issue 1, 33-45

Abstract: This study examines the relative effectiveness of bank-based and market-based financial development on the economic growth of Nigeria with data from 1989 to 2018 using the Auto-Regressive Distributive Lag (ARDL) estimation technique. The study found that bank-based financial development exerts positive and significant influence on Nigeria’s economic performance while stock market-based, rather than contributing positively to the economic prosperity, was found to have an insignificant negative effect. Using GDP per capita growth for sensitivity analysis also showed a somewhat similar result. From this finding, the study concludes that bank-based financial development drives growth in Nigeria more than market-based. The study therefore recommends intensive financial literacy and inclusion campaign to create awareness and bolster public confidence in the stock market and the financial sector.

Date: 2021
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The Review of Finance and Banking is currently edited by Victor Dragota; Bogdan Negrea

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