Measuring the barriers to investment in emerging economies : the case of some African countries

Korutaro, Birungi (2010-12)

Thesis (PhD (Business Management))--University of Stellenbosch, 2010.

Thesis

ENGLISH ABSTRACT: This dissertation is made up of stand-alone essays on the determinants of the investment climate in emerging market economies. Chapter One presents the purpose of this study, the significance of the research to policy makers, researchers and investors and the limitations of the research. Chapter Two investigates empirically whether business regulations, as measured by the „Doing Business‟ indicators, have an impact on investment in 29 emerging market economies in Africa, Asia, Latin America and emerging Europe. The results show that secure property rights and the level of business entry regulation influence the investment climate in these economies. In addition, efficiency of the judicial system, investor protection and the flexibility of employment regulation were found to be insignificant determinants of investment. Chapter Three explores the effect of business regulation on stock market liquidity, using data from a selection of 15 stock markets in Africa. The results from the panel data analysis show that the degree of business regulation does not influence stock liquidity. However, the results confirm that greater protection of minority share-holders' rights, as well as lender and better collateral and bankruptcy laws enhance stock market liquidity. There was anecdotal evidence to suggest that improved judicial efficiency enhances stock market liquidity. The legal origin was found to be significant in explaining the differences in the legal systems of these countries. Countries that have adopted French legal traditions were found to have less active stock markets and less investor and property rights protection compared to countries that have adopted English legal traditions. Chapter Four investigates the effect of the level of business regulation, infrastructure and political environment on investment in 29 African countries. The results provide evidence to show that lower levels of business regulation, less corruption and a stable political environment are important in enhancing investment. The final essay examines the effect of business regulation and geography on investment in a sample of 37 countries in Africa. The results show that more secure property rights and fewer import and export regulations have a significantly positive effect on private investment. In addition, being landlocked and distant from the sea has a negative effect on investment. Furthermore, the findings revealed that property rights protection in landlocked economies is not significantly different from that in coastal economies. In all the studies, the legal origin was found to be significant in explaining cross-country differences in the legal systems of the selected countries. These findings have important implications for policy makers, multi-lateral organisations and investors.

AFRIKAANSE OPSOMMING: Hierdie proefskrif bestaan uit alleenstaande studies oor die beslissende faktore van die beleggingsklimaat in opkomende markekonomieë. In hoofstuk een word die doel van die studie; die belang van die navorsing vir beleidmakers, navorsers en beleggers; en die beperkings van die navorsing aangebied. Hoofstuk twee bevat ‟n empiriese ondersoek om te bepaal of sakeregulasies, soos deur die “Doing Business”-aanwysers gemeet, ‟n uitwerking op belegging in 29 ontluikende markekonomieë in Afrika, Asië, Latyns-Amerika en ontluikende Europa het. Die resultate toon dat veilige eiendomsregte en die vlak van regulasie vir toetrede tot besigheid die beleggingsklimaat in hierdie ekonomieë beïnvloed. Hierbenewens is die doeltreffendheid van die regstelsel, die beskerming van beleggers en die buigsaamheid van indiensnemingsregulasies gevind onbelangrike beslissende faktore vir belegging te wees. In hoofstuk drie word verslag gelewer oor die uitwerking van sakeregulasies op die likiditeit van effektemarkte op grond van data van ‟n keur van 15 effektemarkte in Afrika. Die resultate van die paneeldata-analise toon dat die graad van sakeregulasie nie die likiditeit van effekte beïnvloed nie. Die resultate het egter bevestig dat meer beskerming van die regte van minderheidsaandeelhouers asook verbeterde wetgewing ten opsigte van kredietverskaffing, aanvullende sekuriteit en insolvensie die likiditeit van effektemarkte verhoog. Anekdotiese bewyse is gevind wat aan die hand doen dat verbeterde regsdoeltreffendheid ook die likiditeit van effektemarkte verhoog. Die regsoorsprong is as beduidend gevind ter verklaring van die verskille in die regstelsels van hierdie lande. Lande wat Franse regstradisies aanvaar het, is gevind minder aktiewe effektemarkte en minder beskerming van beleggers en eiendomsregte te hê, vergeleke met lande wat Engelse regstradisies aanvaar het. In hoofstuk vier word die uitwerking van die vlak van sakeregulasie, infrastruktuur en die politieke omgewing op belegging in 29 Afrika-lande bespreek. Die resultate toon bewyse dat laer vlakke van sakeregulasie, minder korrupsie en ‟n stabiele politieke omgewing belangrike faktore is om belegging te bevorder. Die laaste studie ondersoek die uitwerking van sakeregulasies en geografie op belegging in ‟n monster van 37 Afrika-lande. Die resultate toon dat veiliger eiendomsregte en minder invoer- en uitvoerregulasies ‟n beduidende positiewe uitwerking op privaat belegging het. Hierbenewens is daar ‟n negatiewe uitwerking op belegging in lande wat deur land omring is en ver van die see af is. Die bevindings het ook aan die lig gebring dat die beskerming van eiendomsregte in ekonomieë wat deur land omring is, nie aanmerklik verskil van dié in kusekonomieë nie. In al die studies is regsoorsprong as beduidend gevind in die verklaring van verskille in die regstelsels van die gekose lande. Hierdie bevindings het belangrike implikasies vir beleidmakers, multilaterale organisasies en beleggers.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/5450
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