Impact of Capital Market Performance on Economic Growth in Developing Nations

Abstract

The recapitalisation of Nigerian banks improved capital market performance and economic growth. However, economic recessions led to a decline in capital market activities and economic growth. Therefore, this study assessed the influence of capital market performance on economic growth in developing countries for the period 2012 to 2022 using empirical evidence. The specific objective of the study was to examine the impact of market capitalisation on the real gross domestic product (GDP) in developing nations. Related and relevant literature was reviewed for the conceptual, theoretical, and empirical framework for the study. The study employed a qualitative approach using descriptive synthesis to evaluate the results of the impact of capital market performance on economic growth in developing countries using empirical evidence from 2012 to 2022. The analysis revealed that 30% of empirical results from the capital market and economic growth studies in developing nations are not consistent with the apriori expectation. The study concludes that using different variables and approaches for time series analysis produces inconsistent results in developing countries. The study recommended encouraging the financing of companies through domestic capital formation in both capital and money markets. There is also a need for harmonising the approach for consistency of findings in capital market research.