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Capital Market Development and Banking Efficiency in Selected Sub-Saharan African Countries

Abstract


In Sub-Saharan African economies, low banking efficiency exists alongside rapidly developing but illiquid capital markets.  This paper uses three SSA countries as sample and analyzes the linkage of banking efficiency to capital market development across below and above median levels of capital market liquidity. The results of the study show that level of activity in capital market reduces banking efficiency, in association with low capital market liquidity. We conclude that low capital market liquidity has negative effect on how capital market development influences banking efficiency. We recommend that measures towards increasing the liquidity of the capital market are important for capital markets in SSA countries to enhance efficiency of resource allocation via improvement in banking efficiency.


Keywords

Capital market development, Capital market Liquidity, Banking efficiency, SSA.

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