Financial malpractices and stock market development in Nigeria

Abstract

Purpose– The purpose of this paper is to investigate if the prevalence of corruption and other unwholesome financial practices in Nigeria contributed substantially to the stunted growth of the capital market in general, and the stock market in particular.Design/methodology/approach– The paper employed Gregory–Hansen cointegration approach to test the long-run equilibrium relationship between the occurrence of predatory banking practices and stock market capitalization in Nigeria.Findings– There exists a long-run equilibrium relationship between bank fraud and stock market capitalization but with a structural break in 2005.Practical implications– There is an urgent need to overhaul and re-assess from time to time the existing systems of internal checks and controls in banks, as well as other financial institutions in Nigeria.Originality/value– This paper is the first to empirically test the long-run equilibrium relationship between bank fraud and stock market capitalization in Nigeria.