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The impact of firm size and liquidity on the cost of external finance in Africa

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journal contribution
posted on 2023-06-08, 23:39 authored by Bruce Hearn, Jenifer Piesse
Established illiquidity measures are constructed for emerging markets in Africa and used to determine which best explains trading costs. Costs of equity are derived from an augmented Capital Asset Pricing Model for a sample of emerging financial markets generally ignored in the literature. These include: South Africa and Namibia, three countries in North Africa and four in Sub-Saharan Africa (SSA), plus London and Paris as examples of integrated markets. Minimum variance portfolios are constructed and asset weights derived, with the sample divided into countries dependent on their legal regime. Portfolio weights are shown to be directly related to well-regulated markets with high standards of corporate governance and disclosure, and firms seeking cost-effective finance from SSA stock markets are at a distinct disadvantage compared with those in Northern Africa, South Africa and, in particular, London and Paris.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

South African Journal of Economics

ISSN

0038-2280

Publisher

Economic Society of South Africa

Issue

1

Volume

83

Page range

1-22

Department affiliated with

  • Business and Management Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2015-12-04

First Open Access (FOA) Date

2016-10-26

First Compliant Deposit (FCD) Date

2016-10-26

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