Abstract
Most economists recognize that a healthy capital market can enhance economic growth. In 2016, Saudi Arabia launched Vision 2030, and the Financial Sector Development Program is part of the Vision. The program aims to achieve economic diversification, reduce oil dependence, and trigger economic growth. Capital market development has an integral part to play in achieving Vision 2030 goals. For this reason, it is essential to investigate the factors that could influence it. The literature on the impact of macroeconomic factors on the stock market development is inconclusive; thus, it is difficult to generalize the outcome of previous studies. This research investigates the macroeconomic and institutional determinants of stock market development in Saudi Arabia from 2008 to 2021 by using a multiple linear regression approach. Following previous research, our analysis explores the impact of several factors, including Global Trade Openness, Market Depth, Macroeconomic Stability, Control of Corruption, Income level, Private capital flows, Financial intermediary development, Economic Development, Domestic Savings and investment. Among the nine evaluated factors, only four were significant. We find that the determinants of stock market development in Saudi Arabia are Economic Development, Income level, Control of corruption, and Market Depth.
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