نقدینگی بازار و اجرت های اندازه سهام در بازارهای مالی در حال ظهور: استنباطی برای سرمایه گذاری خارجی

Equity markets are increasingly seen as important sources of investment funds in many emerging economies. Furthermore, many countries see the development of such markets as a means to facilitate both foreign equity portfolio investment and foreign direct investment (FDI). This may occur through acquisition of shareholdings in domestic companies, which supplements the low levels of funding from domestic savings. But many emerging stock markets exhibit substantial risk premia that increases the cost of equity for listed domestic firms and deters potential foreign investors. This paper estimates the cost of equity in four major African markets: South Africa, Kenya, Egypt and Morocco. These represent the largest and most developed equity markets in Africa and also act as regional hub markets. London is also included as a link between the emerging and developed financial markets. The Fama and French [Fama, E., & French, K. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3–56] three-factor model capital asset pricing model is augmented to take account of company size and illiquidity factors that feature in African financial markets. The results show that the premia associated with size are more prevalent than with liquidity although both are highly significant in both valuation and cost of equity estimates. The evidence suggests that the lowest cost of equity is achieved in the two major international markets of London and Johannesburg, while the less-advanced North African markets of Morocco and Egypt have higher costs of equity. The developing Kenyan market has the highest cost of equity, although the costs associated with the main market are less than one-third of that in the Alternative Investment Market.

Equity markets are increasingly seen as important sources of investment funds in many emerging economies. Furthermore, many countries see the development of such markets as a means to facilitate both foreign equity portfolio investment and foreign direct investment (FDI). This may occur through acquisition of shareholdings in domestic companies, which supplements the low levels of funding from domestic savings. But many emerging stock markets exhibit substantial risk premia that increases the cost of equity for listed domestic firms and deters potential foreign investors. This paper estimates the cost of equity in four major African markets that represent the largest and most developed equity markets in Africa and which act as regional hub markets. Johannesburg dominates the Southern African Development Community (SADC), Kenya is at the centre of the East African Union, and Egypt (the Cairo and Alexandria Stock Exchanges) leads the North Africa and Maghreb region. Morocco (the Bourse de Casablanca) is included as this is the only other major equity market in North Africa. Other markets have been omitted because of their very small size and severe illiquidity. All four markets have attracted interest from international investors and multinational enterprises. In particular, MNEs in the mining sector (for example, Anglo American, Anglo Gold, and Anglo Ashanti) and in the financial sector (such as Old Mutual, Standard Bank, Standard Chartered, Barclays, Société General, and BNP Paribas) participate in these economies. In many cases, these companies dominate the domestic markets and create a very uneven degree of liquidity. In addition, London is included as a representative of a developed market. This is especially appropriate as the London Stock Exchange and the African exchanges all fall within a ±2 h time zone and London is the market on which many African firms are dual-listed. The paper proceeds as follows. Section 2 describes the institutional characteristics of these markets, the source of the data and the construction of the illiquidity series. Section 3 provides a brief review of the literature on the capital asset pricing model (CAPM) and introduces the three-factor model of Fama and French (1993). Section 4 outlines the model to be estimated, which is based on the Fama and French (1993) model, but augmented with an illiquidity measure proposed by Amihud (2002). Section 5 discusses the construction of the data series, presents the descriptive statistics, and explains the estimation methodology. The results are in Section 6, including those for the grouped data and the individual markets. The final section concludes and offers some policy recommendations.

This paper proposes a size and liquidity-augmented capital asset pricing model specifically focussing on emerging markets, which have previously been excluded from empirical CAPM research. Four large African markets are used in addition to London. The African markets are the large and well-regulated Johannesburg Stock Exchange, the smaller regional hub North African markets of Egypt and Morocco and the much smaller and less active eastern hub market in Nairobi. The Kenyan market is split into two components, the main listings and the Alternative Investment Market. Illiquidity series were constructed on a time-series cross-section basis and augment the Fama and French (1993) risk-adjusted CAPM. The results show that this model is superior to the Sharpe/Linter CAPM and in line with the Fama and French models, as illiquidity is both a priced and consistent characteristic in these emerging markets. In all countries, the market risk premium and the premiums attributed to size factor and illiquidity are important factors in pricing asset returns, although the premium associated with size has a greater impact on overall explanatory power than that associated with illiquidity. The only anomalies found with the model are those frequently encountered in modelling very small firms. Firstly, these affect the betas in terms of their being more illiquid and consequently having greater returns volatility. This is largely responsible for the well-regulated South African market having the highest cost of equity for Africa as a whole because that market is overwhelmingly dominated by small and illiquid firms. Secondly, returns decrease when the size premium increases, and in very high illiquidity firms returns increase when the illiquidity premium increases. However, the most striking differences between all the sample countries are in the dramatic variation in the costs of equity. Not surprisingly, London has the lowest cost of equity, which has already encouraged prominent South African firms to migrate their primary listings from Johannesburg to London. Morocco has the next highest cost of equity, being only slightly higher than London and reflecting the level of development in that market. There is a considerable increase in the cost of equity in Egypt and in Kenya. The Kenyan market itself exhibits a substantial differential of over ten percent in the cost of equity between the main listings board and the AIMS market. This suggests that companies in Kenya are only able to access equity finance at a distinct disadvantage to other locations and also that the development policy of established stock exchanges that aims to attract the SME sector is seriously flawed. The uncompetitive nature of AIMS markets as a source of finance for SMEs is particularly evident when compared to funds raised from the banking sector. The banking sector dominates in many African economies where longer term relationship-based monitoring and surveillance of company performance does allow firms to achieve lower costs of financing. The high costs of equity faced by indigenous African companies seeking to raise domestic finance places a restrictive burden on their ability to finance international expansion and overseas projects. Furthermore, the expense of meeting the much more stringent corporate governance and regulatory requirements of developed markets such as London, including regular auditing and disclosure, means that African companies are forced to raise finance on local markets where the cost of equity is substantially higher. These firms are at a distinct competitive disadvantage. Profit margins have to be considerably higher than competitors in order to break even given the higher cost of equity. This suggests there should be a shift in focus of existing development policy from the rapid development of AIMS markets within exchanges that already suffer from high costs of equity and asymmetric information, towards facilitating access of much needed capital from the more established SME financial markets within South Africa and London. This could be accompanied by a two-tier system of regulation, similar to the bifurcated system of listings requirements and regulation in US markets for overseas listings. Firms from countries with prohibitively high costs of equity would gain from the exposure of a listing in South Africa or London without the high costs of compliance. For international investors there is considerable evidence of segmentation amongst the African emerging markets highlighted by the very different risk premiums and costs of equity. This suggests that investment in these markets would be subject to high and variable levels of transactions costs. Investor information search and verification costs are substantial where there are poor corporate governance regimes and incomplete regulation. However, considerable benefits can be achieved by explicitly incorporating size and liquidity premiums into models that would capture the nuances of these markets and facilitate equity portfolio investment and FDI through stakes in listed equities.