Tag Archives: economic institution

The Role of Institutional Quality in Boosting Total Equity Investment in Nigeria (Published)

This study explores the link between institutional quality and total equity investment in Nigeria with the years under consideration spanning from 1981 to 2016. The specific objectives focused on the impact of impact of economic, political and social institutions as well as information flows on total equity investment. The datasets for each of the variables were obtained from various sources comprising World Bank, World Development Indicators, International Monetary Fund Annual Report, KOF indexes on social, economic and political institutions based on data adapted from United Nations Conference on Trade and Development Statistics, International Telecommunication Union, the United Nations Commodity Trade Statistics Database and the CIA World Factbook (various years). Combinations of Dynamic Least Squares (DOLS) based cointegrating regression methodology and Error Correction Model were utilized as analytical techniques. The KPSS stationarity test results indicate that the variables are mixed integrated with combinations of I(0) and I(1). The Johansen cointegrating test result validated the KPSS stationarity result as it evidenced four cointegrating equations. This suggests that the variables have long run relationship. The cointegrating regression result shows that the coefficients economic institutions, political institutions and index of information flows appear with the hypothesized positive signs and statistically significant at 5 percent level. A percentage change in index of economic institutions stimulates total equity investment by 2.8 percent while 1 percent increase in political institution and index of information inflows robustly boost total equity investments by 4.4 percent and 4.8 percent respectively in the long run. The parsimonious ECM reveals that the cotemporaneous values of economic and political institutions have positive and significant impact on total equity investment in the short run. The Granger causality test results show that on individual basis, economic institutions and information flows cause total equity investment in Nigeria while collectively all the explanatory variables have predictive power for total equity investment in Nigeria. Thus, it is recommended among others that policy makers should prioritize improvement of the requisite economic institution by continuously promoting sound financial system and investment-friendly tariff, exchange rate and trade policies amongst others in order to improve Nigeria’s position as a viable destination for total equity investment.

Keywords: Social Institution, economic institution, equity investments, institutional quality, political institution and Nigeria.