Abstract
Despite the opportunities of growth for the Egyptian stock market, it still offers limited potential to attract investors. This paper explores how various factors related to attitudes, subjective norms and perceived behaviour control as indicted by the theory of planned behaviour affect stock market participation (SMP) in the emerging market of Egypt. The aim of this paper is to study how the influence of factors as financial literacy, risk, influence of others, confidence in the regulator among others, affect consumers’ investment decision to participate in the stock market. A pilot study when combined with literature review revealed eight factors that might affect the investors’ intention and behaviour in the Egyptian stock market. The study then apply TPB to develop a comprehensive model to include the most important factors that may have a strong potential to enhance the equity holding behaviour and explain SMP in the emerging market of Egypt; a market with a lot of potential but rarely studied. This model can be further tested across different developing markets as well. The study concluded that investment intention could predict the actual investment in the stock market (which represents behaviour). Nevertheless, the behaviour is not determined by only those factors tested. Other moderating factors (as change in interest rates, taxes, transaction costs…) can be examined to test the effect on SMP, which opens the room for future research.
Highlights
IntroductionStock markets have received a great deal of attention being a main source of financial development and economic growth
Over the last decade, stock markets have received a great deal of attention being a main source of financial development and economic growth
A greater understanding of the variables in the model projected in this paper would aid regulators, policy makers and financial institutions in general to focus their efforts on the significant determinants of behavioral intentions’ of individuals towards stock market participation in Egypt
Summary
Stock markets have received a great deal of attention being a main source of financial development and economic growth. Despite the documented benefits of capital markets to economic growth, Stock market participation levels across countries are still not up to normative standards [1]. With respect to Egypt for example, and despite the very high savings rates and the positive look for the future of investments, and with continuous amendments in Capital market laws and regulations, we argue that there is still a low penetration of Egyptian Stock Market especially when compared to savings in real estate and gold. Examining the factors that may affect the stock market participation (SMP hereafter) in developed markets are controversial too. Financial literacy, education, risk tolerance amongst others have shown high correlation with SMP in developed markets [2,3,4]. Ulku and Ikizlerli [5] argue that EEMENA (Eastern Europe, Middle East, North Africa) region has been surprisingly neglected in literature; despite it hosts those emerging economies that are most dependent on foreign capital inflows
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