Factors influencing the utilisation of the capital market in Zambia
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The capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Capital markets growth in Africa is gradually taking shape. This growth is premised on how they are utilized. This study sought to find the factors influencing the utilisation of the Capital Market in Zambia. The independent variables were market capitalisation, number of listed companies, number of financial instruments traded, Stock Price Index and the Market Turnover. The dependent variable in this study was the capital market utilisation. Further, secondary data was collected for a period of ten (10) years from 2007 to 2017. The study employed a descriptive and exploratory research designs and linear regression model was used to analyse the data. SPSS version 23 was used for data analysis purposes. The results for the study produced an R-square value of 0.958 which means that 96 percent of the utilisation of capital market is attributed to the variations in Market Turnover, Number of Listed Companies, Number of Instruments traded, Stock Price Index and the Market Capitalisation while the remaining 4 percent of the variables in the model are not explained. ANOVA results show that the F-test of the variation in the regression to the ratio of the variation of the residual or error was found to be 34.526, the p value was 0.000 which is less than 0.05 level of significant and reliable. The relationship between listed companies and the number of companies that are registered with PACRA was found to be 0.042 level of significance. This shows that there is a very weak correlation between the two; however, they are statistically significant. The study discovered that in ten years’ time the market raised K603 Billion with rights issue accounting for 87 percent, IPO, 0.17 percent, MTN 0.15 percent, Corporate Bonds 12 percent, Zambia depository receipts 0.015 percent and preference shares grabbing a 3.4 percent. The market turnover was compared to GDP ratio and it was found that the ratio has been fluctuating between 0.04 percent and 4.24 percent in the last 10 years. This shows that the market is not utilised. In addition, the study reviewed that for the last 10 years the market capitalisation to GDP ratio of the Zambian Economy has been floating within 22.92 percent to 40.14 percent with the average of 31.76 percent. This shows that the capital market is underutilised. Therefore, the study recommended that the Government should revise the regulatory framework. The policy makers should strengthen the capital market and address the major challenges that are affecting the utilisation of the capital market. Key Words: Capital Market utilisation, Market Capitalisation, Financial Instruments, Stock Exchange, Issuers.
The University of Zambia