Abstract
This paper aimed to assess the effect of the cryptocurrency market on firms’ market value, especially on the sectoral level, in Africa. To reach the study’s main goal, the authors adopted the Panel-Corrected Standard Errors (PCSEs) and Panel Double-Clustered Standard Errors (PDCSEs). Using firm-level data, the results of this study can be summarized as follows: (a) The cryptocurrency market hurts the firm market value in Africa. (b) The firms operating across different sectors respond disproportionally to the cryptocurrency market. For instance, the sectors that offer low returns in Africa (industrial, energy, financial) negatively respond to the cryptocurrency market, while the sectors that offer high returns (real estate and information technology) are not significantly affected. (c) The cryptocurrency market has a perverse effect on less experienced and highly indebted firms. (d) The consistent policies of governments to ban cryptocurrency do not work efficiently.
Highlights
Over the last decade, cryptocurrency transactions in Africa have considerably increased
These latter findings suggested a correction for the standard errors using the Panel-Corrected Standard Errors (PCSEs) and Double Panel-Corrected Standard Errors (DPCSEs) methods
It is noticeable that the standard errors between brackets changed from the PCSE to DPCSE models
Summary
Cryptocurrency transactions in Africa have considerably increased. By December 2021, the cryptocurrency users in this region reached 32 million, representing 2.6% of the continent’s population (TripleA 2021). Previous studies suggested the prominence of a significant relationship between the cryptocurrency market and many macroeconomic and financial indices (Dyhrberg 2016; Kostika and Laopodis 2019; Trabelsi 2018; Sami and Abdallah 2020a, 2020b). Relative to these studies, this paper examines four main questions. Africa has the world’s largest share of retail-sized transfers in the cryptocurrency market, accounting for almost 30% of all transactions.(ChainAnalsysis 2020), compared with other worldwide regions, whose retail-sized transfers are below 20%. Cryptocurrency users account for 8.5%, 7.1%, and 6.3% of the population in Kenya, South Africa, and Nigeria, respectively. (TripleA 2021)
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