Determinants of Capital Market Development in Kenya
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This study sought to determine the determinants of capital market development in Kenya. The empirical study was conducted using time series data for the period 2001- 2020. This study adopted quantitative approach and employed secondary data of twenty years; Pearson correlation test was used to evaluate the relationship between the variables. Furthermore, this study used multiple regression analysis by applying Ordinary Least Square (OLS) method. The macroeconomic variable data involved were stock market liquidity, investment, and foreign direct investment. For capital market development indicators, market capitalization, listed companies, value traded and turnover ratio were considered. The regression results demonstrate that all the variables, stock market liquidity, investment and foreign direct investment are important determinants of capital market development in Kenya. The findings from Ordinary Least Square (OLS) indicated that the model is significant in a whole and the three independents explain 91% changes in the dependent variable. The study recommends the following policies among others; the government should regulate and control financial sector in order to promote the capital market development. Policy maker should cut off restriction for the foreigner investors and to create strategies to increase the foreign direct investment and offer incentives.
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