THE IMPACT OF GOVERNANCE STRUCTURES ON ECONOMIC GROWTH IN AFRICA: A PANEL DATA ANALYSIS OF 47 AFRICAN COUNTRIES

Major international institutions like the World Bank, African Union, and International Monetary Fund have made the development of robust governance systems a “sacred utterance” since the 1990s. Our study aimed to refute this common thinking by examining how governance structures have affected the ex...

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Published in:Technological and economic development of economy 2023-12, Vol.29 (6), p.1708-1727
Main Authors: Appiah-Kubi, Seth Nana Kwame, Malec, Karel, Phiri, Joseph, Maitah, Mansoor, Kotaskova, Sylvie Kobzev, Mach, Jiri, Sirohi, Jitka
Format: Article
Language:English
Subjects:
Accountability
Africa
Corporate governance
Corruption
Data analysis
Economic analysis
Economic development
Economic growth
Financial inclusion
financial market
GDP
Generalized method of moments
governance structures
Gross Domestic Product
Impact analysis
Inflation
Political factors
political stability
rule of law
Securities markets
Venture capital
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Summary:Major international institutions like the World Bank, African Union, and International Monetary Fund have made the development of robust governance systems a “sacred utterance” since the 1990s. Our study aimed to refute this common thinking by examining how governance structures have affected the expansion of the financial market in 47 African countries from 2008 to 2019. Using the availability of venture capital as a proxy for financial market development, our article departed from existing literature which used stock exchange characteristics as benchmarks for growth in the financial market. The governance variables comprise the six global governance indices: control of corruption, government effectiveness, political stability, regulatory quality, the rule of law, and voice and accountability. The model’s control variables include GDP per capita, inflation, and trade openness. Our finding suggests that a great quality governance climate is significant in explaining the growth of the financial market in Africa using the generalized method of moments (GMM) methodological approach with corrected standard errors. Considering these findings, our research makes the case that solid institutional frameworks might encourage the degree of financial systems growth in Africa. Therefore, the financial development rate in the African region will be significantly influenced by improving the quality of governance through strengthening legal and institutional frameworks to facilitate financial inclusion.
ISSN:2029-4913
2029-4921
DOI:10.3846/tede.2023.20394