The stock market capitalisation and financial growth nexus: an empirical study of western European countries

Abstract This study aimed to analyse the stock market capitalisation and financial growth nexus of Western European countries from 1989 to 2018 in order to understand the interactive relationship between the stock market and the economy to identify the specific financial market channels through whic...

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Autor principal:	Faris Alshubiri
Formato:	article
Lenguaje:	EN
Publicado:	SpringerOpen 2021
Materias:	Stock market capitalisation Financial growth Financial market theory Financial institutions Western Europe Business HF5001-6182 Finance HG1-9999
Acceso en línea:	https://doaj.org/article/40c0f3c0a2d3459fa52cac5865574c99
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spelling	oai:doaj.org-article:40c0f3c0a2d3459fa52cac5865574c992021-11-07T12:15:11ZThe stock market capitalisation and financial growth nexus: an empirical study of western European countries10.1186/s43093-021-00092-72314-7210https://doaj.org/article/40c0f3c0a2d3459fa52cac5865574c992021-11-01T00:00:00Zhttps://doi.org/10.1186/s43093-021-00092-7https://doaj.org/toc/2314-7210Abstract This study aimed to analyse the stock market capitalisation and financial growth nexus of Western European countries from 1989 to 2018 in order to understand the interactive relationship between the stock market and the economy to identify the specific financial market channels through which economic growth is managed. The pooled least square findings identified positive significant relationships between stock market capitalisation, foreign direct investment and stocks traded and financial growth, while negative and significant relationships were found between GDP per capita growth and inflation and financial growth. The fixed effect, random effect and pooled mean group models yielded the same results, indicating positive significant relationships between stock market capitalisation and stocks traded and financial growth, while the effect of foreign direct investment on financial growth was positive and insignificant. Finally, there were negative and significant relationships between GDP per capita growth and inflation and financial growth. The results from the quantile regression (tau = 0.10, 0.20, 0.30, 0.40 and 0.50) there were positive relationships between stock market capitalisation and stocks traded and financial growth for all percentiles, while there were negative relationships between GDP per capita growth and inflation and financial growth except at the 0.30 percentile; foreign direct investment also had a negative relationship to financial growth at the 0.30 percentile. Most variables were significant at a 1% significance level. However, inflation was insignificant at the 0.10 percentile, foreign direct investment was insignificant at the 0.20, 0.30, 0.40 and 0.50 percentiles, and stocks traded were insignificant at the 0.40 and 0.50 percentiles. All of the applied the diagnostic tests confirmed the robustness of the data. The main conclusion is that countries should minimise any regulatory obstacles to financial markets and protect the rights of shareholders. Furthermore, advanced financial systems should reduce the obstacles faced by companies in terms of external financing.Faris AlshubiriSpringerOpenarticleStock market capitalisationFinancial growthFinancial market theoryFinancial institutionsWestern EuropeBusinessHF5001-6182FinanceHG1-9999ENFuture Business Journal, Vol 7, Iss 1, Pp 1-20 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Stock market capitalisation Financial growth Financial market theory Financial institutions Western Europe Business HF5001-6182 Finance HG1-9999
spellingShingle	Stock market capitalisation Financial growth Financial market theory Financial institutions Western Europe Business HF5001-6182 Finance HG1-9999 Faris Alshubiri The stock market capitalisation and financial growth nexus: an empirical study of western European countries
description	Abstract This study aimed to analyse the stock market capitalisation and financial growth nexus of Western European countries from 1989 to 2018 in order to understand the interactive relationship between the stock market and the economy to identify the specific financial market channels through which economic growth is managed. The pooled least square findings identified positive significant relationships between stock market capitalisation, foreign direct investment and stocks traded and financial growth, while negative and significant relationships were found between GDP per capita growth and inflation and financial growth. The fixed effect, random effect and pooled mean group models yielded the same results, indicating positive significant relationships between stock market capitalisation and stocks traded and financial growth, while the effect of foreign direct investment on financial growth was positive and insignificant. Finally, there were negative and significant relationships between GDP per capita growth and inflation and financial growth. The results from the quantile regression (tau = 0.10, 0.20, 0.30, 0.40 and 0.50) there were positive relationships between stock market capitalisation and stocks traded and financial growth for all percentiles, while there were negative relationships between GDP per capita growth and inflation and financial growth except at the 0.30 percentile; foreign direct investment also had a negative relationship to financial growth at the 0.30 percentile. Most variables were significant at a 1% significance level. However, inflation was insignificant at the 0.10 percentile, foreign direct investment was insignificant at the 0.20, 0.30, 0.40 and 0.50 percentiles, and stocks traded were insignificant at the 0.40 and 0.50 percentiles. All of the applied the diagnostic tests confirmed the robustness of the data. The main conclusion is that countries should minimise any regulatory obstacles to financial markets and protect the rights of shareholders. Furthermore, advanced financial systems should reduce the obstacles faced by companies in terms of external financing.
format	article
author	Faris Alshubiri
author_facet	Faris Alshubiri
author_sort	Faris Alshubiri
title	The stock market capitalisation and financial growth nexus: an empirical study of western European countries
title_short	The stock market capitalisation and financial growth nexus: an empirical study of western European countries
title_full	The stock market capitalisation and financial growth nexus: an empirical study of western European countries
title_fullStr	The stock market capitalisation and financial growth nexus: an empirical study of western European countries
title_full_unstemmed	The stock market capitalisation and financial growth nexus: an empirical study of western European countries
title_sort	stock market capitalisation and financial growth nexus: an empirical study of western european countries
publisher	SpringerOpen
publishDate	2021
url	https://doaj.org/article/40c0f3c0a2d3459fa52cac5865574c99
work_keys_str_mv	AT farisalshubiri thestockmarketcapitalisationandfinancialgrowthnexusanempiricalstudyofwesterneuropeancountries AT farisalshubiri stockmarketcapitalisationandfinancialgrowthnexusanempiricalstudyofwesterneuropeancountries
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The stock market capitalisation and financial growth nexus: an empirical study of western European countries

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