GLOBALIZATION AND THE FINANCIAL MARKET
This study examined globalization and the financial market. In order to actualize the objectives of the study, various literature and theoretical issues were discussed. The instrument used for the purpose of this research was gathered through primary and secondary sources. The primary source is through questionnaires while the secondary source extracts from textbooks by different authors, journals and other publications. The mass of information generated from the questionnaires was summarized in form of table and analyzed using simple percentage. The researcher administered one hundred (100) questionnaires to respondents, out of which ninety-five (95) were retrieved for the purpose of presenting and analyzing responses to issues raise in the questionnaires. The data collected was analyzed using Z-test statistical tool. The findings from analysis revealed among other things that globalization positively affects financial market growth in Nigeria. Recommendations were however made by the researcher.
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
Background to the Study
Statement of the Research Problem
Statement of Objectives
Statement of Hypotheses
Scope of the Study
Significance of the Study
Limitations of the Study
Definition of Terms
CHAPTER TWO: LITERATURE REVIEW
Globalization and Stock Market Growth Linkages
Preconditions of Stock Market Growth Under Globalization
Cost and Benefit of Stock Market Globalization
CHAPTER THREE RESEARCH METHODOLOGY
Population of the Study
The Sample Size
Data Collection Method
The Research Instrument
Data Analysis Method
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION
Test of Hypothesis
CHAPTER FIVE: SUMMARY OF FINDINGS, POLICY IMPLICATION AND CONCLUSION
Summary of Findings
BACKGROUND TO THE STUDY
The term “globalization” has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions—both trade and financial flows. Globalization is defined by International Monetary Fund (IMF) as a “historical process, the result of human innovation and technological progress, which refers to increasing integration of economies around the world, particularly through trade and financial flows.” (IMF, 2000) Alan Greenspan, defines globalization as "the increasing interaction of national economic systems." He links this trend to technological progress and to government policies that have promoted deregulation and privatization in markets around the world. In particular, technological improvements have lowered transactions and information costs, promoting the efficient operation of market-based economic systems. The resulting expansion of markets has been associated with increased competition and reduced tariffs and trade barriers.
Globalization is a permanent, non-reversible phenomenon. “The globalization system, unlike the Cold War system, is not static, but a dynamic ongoing process: globalization involves integration of markets, nation-states and technologies to a degree never witnessed before — in a way that is enabling individuals, corporations and nation-states to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that is also producing a powerful backlash from those brutalized or left behind by this new system. (Friedman, 1999)
The ninth decade of the twentieth century was dominated by the term globalization on international relations, declaring that civilization will be the culture of globalization and according to their goals and their perceptions of their own in order to control and dominate the world and to all fields and from the area of financial markets through the globalization of financial activity and the integration of capital markets. The globalization has led to increasing mutual overlaps among various countries of the world's financial markets, and through which the exchange and trading of debt, cash and financial assets. As the financial markets have become a global tool for more connectivity among the countries of the world due to the type of operations that are included in each of the currency markets, financials and bonds as well as loans and securities. And increased globalization of financial markets in recent years largely led to the term "financial global village" or "money market universe," John, author of "false dawn" that there is now a global market in the capital on a scale not known before, and others believe that the globalization of financial markets have reflected the reality of financial revolution in terms of both market size and vulnerability, and new financial instruments, or from where it made a significant correlation between these markets, which could put an end to the so-called "end of the geographical boundaries" (Abdalla, Abdulkader, Abdul and Wan, 2012)
Moreover it has witnessed the financial sector in the world a number of ongoing and rapid developments, and the successive changes led to the growing role of financial institutions, the emergence of a huge amount and variety of financial services that they provide, economic funds and what helped access to that increasing use of modern financial techniques. However the increase of financial globalization and the increasing movement of financial flows to developing countries have disproportionately led to the creation of a number of negative effects that have affected the overall stability and development within these countries.
STATEMENT OF THE RESEARCH PROBLEM
Until recently, Nigerian financial markets have not performed impressively when compared to those in other regions of the world. However, Nigerian financial exchange has experienced significant gains in the entry of the new millennium: market capitalization and new listing no doubt have increases. These changes have taken place within the context of globalization or internationalization policies that reflect the effort of the government to use financial markets as a means of privatization and engine growth of the economy.
However, the concern about the financial market growth in Nigeria is the impact of globalization on the market. It is not yet clearly ascertained whether globalization especially through increased Foreign Direct Investment (FDI) generates positive impact or otherwise on the financial market growth. Though, not many have looked at the effect of globalization on financial market growth or economic development of Nigeria undoubtedly, globalization has impacted on most factors identified in the literature to be determinants of financial market growth. The nature of this relationship needs to be ascertained.
In the light of the above the following research questions are raised:
Has globalization affected financial market growth in Nigeria?
Has trade liberalization influenced financial market capitalization?
Is there positive relationship between foreign direct investment and financial market growth in Nigeria?
The answering of these questions above is the first step towards understanding the link between globalization and financial market growth in Nigeria; hence the statement of the research problem cannot be downplayed.
STATEMENT OF OBJECTIVES
The broad objective for this study is to examine the impact of globalization and financial Market in Nigeria.
Specifically, the objectives of the study include:
To identify if globalization affects financial market growth in Nigeria.
To examine whether trade liberalization influenced financial market capitalization.
To identify if there is a positive relationship between foreign direct investment and financial market growth in Nigeria.
STATEMENT OF HYPOTHESES
In the light of the broad objective of the study, the hypotheses below are formulated:
Ho: Globalization does not positively affect financial market growth in Nigeria.
H1: Globalization positively affects financial market growth in Nigeria.
Ho: Trade liberalization does not influenced financial market capitalization.
H1: Trade liberalization does not influenced financial market capitalization.
Ho: Foreign investment has no impact on the growth of financial market capitalization in Nigeria.
H1: Foreign investment has impact on the growth of financial market capitalization in Nigeria.
SCOPE OF THE STUDY
This study examines the impact of globalization on financial market in Nigeria. As a result of the above, the scope of this research will be limited to the financial market in Nigeria (The Nigeria Stock Exchange).
Temporary or in term of time series, a period of 30 years is used i.e. 1980 to 2010 using some market indicators as means of assessing the impact of globalization and financial market growth in Nigeria.
SIGNIFICANCE OF THE STUDY
After the completion of this research work, the below parties would find it very useful.
Policy Makers: The importance of knowing the major globalization indicators that impact on financial market growth in Nigeria cannot be overemphasized. This study is very important as it would provide suggestions of how policy markers can manipulate trade liberalization, foreign private investment, exchange rate disparity, foreign indebtedness, and inflation and interest rate to the benefit of Nigeria financial market.
Investors: This study will also be useful to investors’ especially institutional investors that consider global forces when investing. It will assist and provide a clear explanation to investors on how globalization forces affect their investment in financial market.
Researchers and Readers: The study will provide information to researchers who would want to write articles and working papers on the issue of financial market growth and globalization. Readers who want to broaden their knowledge on the relationship between financial market growth and globalization will fine the work useful.
The government and financial market regulator like Securities And Exchange Commission (SEC) and the Nigerian Financial Exchange (NSE) would find the research work handy especially in the areas of policy formulation and simulation.
This study will make do with both the primary and the secondary data. The primary source of data collection will base on the information obtained through questionnaires administered to elite respondents, while the secondary data will rely on the existing literatures on the subject matter, e.g. textbooks, journals, articles etc.
A total of 100 questionnaires will be administered to respondents. Thereafter, Z-test statistical tool will be used to test the hypothesis.
LIMITATIONS OF THE STUDY
This research work cannot hope to clear up all the issues relating to the relationship between Globalization and Financial Market Growth in Nigeria; as it subject to a number of limitations. These limitations are:
On statistical information, which is in most cases incomplete and difficult to access.
Inadequate research materials online and even in academic publications and journals was a problem
The high cost of transportation to source for information also made it difficult to access most of the publication of research institutions.
These limitations would not however diminish the scope and findings.
DEFINITION OF TERMS
Globalization: Growth to a global or worldwide scale; "the globalization of the communication industry".
Abdalla A. S. S., Abdulkader O. A. A., Abdul T. B. B. and Wan Fauziah W. Y. (2012), The Future Direction for the Globalization of Financial Markets and the Impact of that of Financial Markets in the Arab Developing Countries, Journal of Basic and Applied Scientific Research, 2(1)663-671.
IMF, (2000) “Globalization: Threat or Opportunity?” April, 2000, www.imf.org
Friedman, T.L., (1999) The Lexus and the Olive Tree: Understanding Globalization, New York: Farrar, Straus and Giroux, 1999.
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