Legal Aspects of Stock Market Development in Ethiopia: Comments on Challenges and Prospects

Abstract

Ethiopia lacks the institutional and legal frameworks that regulate themarket for stock exchange, and in effect, the current stock trading activitymay grow into a largely unregulated space in which everyone speculatesand plays for short-term gains. Introducing stock market amidst theproliferation of companies in Ethiopia can thus benefit the economy. It isnatural to expect that both companies under formation and investors inexisting companies sell and transfer their shares to third parties giving riseto the availability of tradable shares in the market. This comment is amodest attempt to show the desideratum of introducing the legal andinstitutional frameworks governing stock market in Ethiopia. It tries toanalyze the existing legal framework on stocks and tries to juxtaposerelevant literature to give picture on the legal aspects of stock marketdevelopment. In view of the potential advantage and the concerns raised by stock market development, I argue that devising legal infrastructure that accommodates stock market in Ethiopia is a timely issue to catch up with the global trend, given the current demand for stock trading as revealed by the over-the-counter markets.Key words: Companies, over-the-counter, stock brokerage, stock market, Ethiopia