Record Details

Effects of Interest Rate and Debt on Equity Investment

American Journal of Humanities and Social Sciences

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Field Value
 
Title Effects of Interest Rate and Debt on Equity Investment
 
Creator Obudah, Bodiseowei C; Department of Economics, Niger Delta University, Wilberforce Island, Bayelsa State, Nigeria
Tombofa, Steve; Department of Economics, Niger Delta University, Wilberforce Island, Bayelsa State, Nigeria
 
Subject —
Domestic debt, equity investment, monetary policy rate, economic growth
 
Description Equity investment is an important component of domestic investment and for over two decades Nigeria has witnessed volatility in the value of equity investment. The objectives of the study are to examine the effects of interest rate and domestic debt on private equity investment growth in Nigeria covering the 1987-2010 period as well as to determine if government borrowing crowds out private investment and borrowing. We used the co-integration technique to test the long run relationship among the variables and went to use standard ordinary least squares technique and error correction analysis. The results show that domestic debt and GDP growth rate had a positive effect on equity investment as expected. On the other hand, monetary policy rate had a negative effect on equity investment. The results of this article have crucial implications on the desire by individuals, firms and governments to participate in the equity investment market and policy-makers’ decisions. The Nigerian government should take cognisance of the 25 percent debt-to-GDP benchmark as adopted by the Federal Executive Council in 2010 and the revision to 30 percent in view of recent realities or the international norm of 60 percent target. Furthermore, funds from debt should be used productively and avoid misappropriation. The monetary policy rate should be allowed to exhibit the interplay of the market forces so as to encourage both internal and external capital investment in the Nigerian economy. 
 
Publisher World Scholars
 
Contributor —
 
Date 2013-05-30
 
Type Peer-reviewed Article
 
Format application/pdf
 
Identifier http://wscholars.com/index.php/ajhss/article/view/301
10.11634/232907811503301
 
Source American Journal of Humanities and Social Sciences; Vol 1, No 2 (2013); 31-36
 
Language en
 
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