Author: Afolabi E. Olowookere & Joseph O. Ogebe
Volume: 61 Issue No:1 Year:2019

Abstract: The capital market plays a vital role in providing long-term funding for businesses to expand. If this role is efficiently performed with the aim of industrialization, the industrial sector is expected to obtain the required funds from the market for expansion. This fact has been established in most developed economies. However, the low level of industrialization in Nigeria raises questions on whether the capital market has met the expectation of providing funds to drive industrial sector growth. Employing a firm-level perspective, this study examined the relationship between capital market financing and the extent of industrialization of firms listed on the Nigerian Stock Exchange. Specific attempt was made to see if capital market financing (debt and equity) contributes positively to the growth of the industrial sector relative to other sectors in the Nigerian capital market. The study employed data of all publicly-listed firms on the Nigerian Stock Exchange from 1980 to 2016, with these firms further grouped into their relevant industries. The transcendental logarithmic (translog) production function that incorporates debt and equities alongside the traditional labour and capital inputs was used to examine the impact of capital market financing on the progress of industrialization in Nigeria. Results from the analysis support the positive contribution of the capital market to the progress of industrialization, and the study recommends further redirecting of capital market funding towards improved industrial sector growth.

JEL classification: E 62, O16