Title: Stock market development, banks and firms growth: empirical evidence from Saudi Arabia

Authors: Najeb Masoud; Glenn Hardaker

Addresses: Department of Accounting and Finance, Middle East University Business School, PO Box 383, Amman, Jordan ' Business Education Research Group, University of Huddersfield Business School, Huddersfield, UK

Abstract: This study provides new and updated empirical investigation on the effect of stock market development, banks development and firms growth using Saudi Arabia industrial firm-level data set for the period 1995-2013 and applying GMM, MG techniques model developed for dynamic panels. The econometric results reveal that with more development in the stock market firms that use equity finance heavily grow faster than firms that do not. These findings provide firm-level support for the proposition that the development of the stock market facilitates economic growth in Saudi Arabia. Our results also show that both the stock market and the banking sector development are significant in facilitating the firm's growth in Saudi Arabia. In particular, we find that measures of both market and banking development independently predict firm's growth when entered together in firm growth regressions. The results are consistent with the hypothesis that the stock market and the banking sector development have different effects on small and large firms.

Keywords: Saudi Arabia; stock market development; bank development; firm growth; GMM; generalised method of moments; MG techniques model; Masoud and Gleen; banking industry; stock markets; economic growth.

DOI: 10.1504/AJFA.2014.060817

American Journal of Finance and Accounting, 2014 Vol.3 No.2/3/4, pp.185 - 216

Received: 27 Mar 2013
Accepted: 10 Feb 2014
Published online: 11 Oct 2014 *

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