Stock Market Development and Equity Financing: Evidence from Quoted Manufacturing Firms in Nigeria
Vol.6 Issue 2
This study examined the relationship between stock market development and equity financing of quoted manufacturing firm in Nigeria. Cross sectional data was sourced from financial statement of the quoted manufacturing firms and Central Bank of Nigeria Statistical Bulletin from 1985-2018. Two regression models were formulated to explore the relationship between stock market development and equity financing. Equity financing ratio was used as dependent variables while Market capitalization ratio, Volume of shares retained Volume of share traded, all share index and Market Capitalization were used as independent variables. The study employed Ordinary Least Square Methods of panel co-integration, panel unit root test and granger causality test. After cross examination of the validity of the pooled effect, fixed effect and the random effect, the study accepts the fixed effect model. The study found from model 1 that 45.8 percent of the variation in equity ratio explained by the variables in the equation. while beta coefficient proved that market capitalization ratio have positive but no significant effect on equity ratio while market capitalization ratio have negative and significant effect on equity ratio of the quoted manufacturing firms. model II found that 60.1 percent of the variation in debt ratio explained by the variables in the equation while the beta coefficient proved that all share price index, have positive but no significant effect, market capitalization have positive but no significant effect while value of share traded have negative and no significant effect on debt ratio of the quoted manufacturing firms. From the findings, we conclude that stock market development have significant effect on equity financing of the quoted manufacturing firms. From the findings, stock market development has significant effect on equity financing. We recommend that the capital market regulatory authorities should ensure that Nigeria stock market operate with international best practice and all barriers to inflow of foreign portfolio investment should be discouraged.
