Effect of Fraud and Corruption on Capital Market Performance in Nigeria

Abstract

The study examined the effect of fraud and corruption on capital market performance. The core purpose of this research work is to investigate the effect of fraud and corruption on Nigeria's Capital Market Performance. The study used secondary data sourced from the Nigeria Exchange Group and the transparency index from 1999 to 2018. Transparency Index, Corruption Perception Index, and Total Fraud were the independent variables and the dependent variables are all share index and stock value traded. A time-series data methodological approach was adopted. The study used secondary data sourced from the Nigeria Exchange Group and the transparency index from 1999 to 2018. The study employed the Error Correction Model (ECM) as the estimation technique. The study found that fraud and corruption has a negative effect on all share index but a positive effect on stock value traded in Nigeria. The granger causality test also shows a unidirectional causality between fraud and corruption on capital market performance in Nigeria. The results suggest that fraud and corruption reduce investors' confidence in the market and can discourage investment in the market. The study recommends among others there should be cooperation between the appropriate law enforcement agencies and anti-corruption bodies with the Securities and Exchange Commission (SEC) to provide an equitable and rational market for all classes of investors. The whistleblowing scheme should be strengthened and made to be effective in the capital market.