The impact of firm size and liquidity on the cost of external finance in africa
The impact of firm size and liquidity on the cost of external finance in africa
Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explains trading costs. Costs of equity are derived from an augmented Capital Asset Pricing Model for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in Sub-Saharan Africa (SSA), plus London and Paris as examples of integrated markets. Minimum variance portfolios are constructed and asset weights derived, with the sample divided into countries dependent on their legal regime. Portfolio weights are shown to be directly related to well-regulated markets with high standards of corporate governance and disclosure, and firms seeking cost-effective finance from SSA stock markets are at a distinct disadvantage compared with those in Northern Africa, South Africa and, in particular, London and Paris.
Africa, emerging financial markets, G11, G12, G15, Liquidity, O55, portfolio diversification
1-22
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
1 March 2015
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Hearn, Bruce and Piesse, Jenifer
(2015)
The impact of firm size and liquidity on the cost of external finance in africa.
South African Journal of Economics, 83 (1), .
(doi:10.1111/saje.12062).
Abstract
Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explains trading costs. Costs of equity are derived from an augmented Capital Asset Pricing Model for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in Sub-Saharan Africa (SSA), plus London and Paris as examples of integrated markets. Minimum variance portfolios are constructed and asset weights derived, with the sample divided into countries dependent on their legal regime. Portfolio weights are shown to be directly related to well-regulated markets with high standards of corporate governance and disclosure, and firms seeking cost-effective finance from SSA stock markets are at a distinct disadvantage compared with those in Northern Africa, South Africa and, in particular, London and Paris.
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e-pub ahead of print date: 11 August 2014
Published date: 1 March 2015
Keywords:
Africa, emerging financial markets, G11, G12, G15, Liquidity, O55, portfolio diversification
Identifiers
Local EPrints ID: 423179
URI: http://eprints.soton.ac.uk/id/eprint/423179
ISSN: 0038-2280
PURE UUID: 51acdfb7-9891-412d-9ea0-2bb7c2a383df
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Date deposited: 19 Sep 2018 16:30
Last modified: 16 Mar 2024 04:37
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Author:
Jenifer Piesse
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