The Impact Of Equity Purchase In The Capital Market (2000-2007)

The Impact Of Equity Purchase In The Capital Market (2000-2007)

Chapter One

Preface

Background To The Study

The part of the capital request in the revolutionisation of the frugality can not be over emphasize especially when one considers the high position of fiscal intermediation it conducts as regards its part in channelizing finances in large quantum from fat areas to deficiency areas.

The capital request refers to the request trading in medium and long term fiscal instrument with majorities which exceeds one time. In other words, it’s the request that enables government and companies to raise long term capital with ease by issuing securities. According to Gaumnitz and Duagau,( 2002), the capital request is a “ complex of institutions and mechanisms through which intermediate finances and long term finances are pooled and made available to businesses, government and individualities and instrument formerly outstanding are transferred ”.

The capital request provides the wherewithal for the growth of the frugality and development programme and serves as an index of the frugality’s liquidity and general performance( Osaze, 2002).

Anyanwu( 1999) defined the capital request as a request for the rallying and application of long term finances for development. It can also be defined as that request were medium and long term loan stock are moreover bought or vended for investment and infrastructural development systems by business and government. The capital request is occasionally appertained to as the equity request. This is because the instrument with which the capital request operates is appertained to as the equities, which comprises of shares debentures and development stocksetc.

Equity on the other hand is an instrument or attestation evidencing and investment made by a party and constituting a unborn claim against the former by the ultimate outstanding at maturity. Alice and Anao( 2000) defined equity or security as factual substantiation of power or annuity to claim upon the means of the issuing association which may be a business, establishment, government or a quasi government request instruments to be ranked as equities. These equity instruments include marketable papers, short term storeroom bills and storeroom instruments( Ugorji, 2002).

Capital request includes a whole complete set of institutions and procedures for furnishing intermediate and long term finances to fund druggies( Ugorji, 2002). In other words, capital request plays a vital part in capital conformation which is necessary for the development of an frugality. Hence, capital request is a high motor that drives an frugality on its path to growth and development because it’s responsible for long term growth capital conformation,( Osaze, 2002).

The capital request in Nigeria deals with long term securities similar as equities, civil government development stocks, state and original government bonds, commercial bondsetc. which are used to rally finances that would be held by druggies for a considerable length of time or in infinity( Edo, 2003). The capital request is occasionally appertained to as the security request. This is because the instrument with which the capital request operates is appertained to as securities, which comprises of shares, equities, development stocksetc.

Equity purchase ahs to do with the buying and selling of equities or shares in the capital request. The equity capital request is an important part of the capital request. In this request, companies and fiscal institutions raise finances and give equities using the company by copping the shares or equities. Company stocks are the high fiscal instrument of the equity capital request. This instrument is handed and maintained by the companies or the fiscal institutions themselves.

The character of the stocks in the equity capital request is largely dependent on the companies themselves, because of the fact that it’s maintained by different types of fiscal data handed by the companies. The handed data helps the investor understand the present position and the future of the company in the equity capital request. The equity capital request and the debt capital request together form the capital request. The primary difference between the equity capital request and the debt capital request is the quantum of threat and return related to them. The equity capital request is known for its huge returns and it high pitfalls. On the other hand, the debt capital request is far more secure than the equity request but the returns are low. Hence, the part of equity purchase in the capital request can not be over emphasized.

The Nigerian Stock Exchange( NSE) is the heart of the capital request in Nigeria. It was originally know as Logos Stock Exchange( LSE). Trading on securities take place then. It’s an arising request which commenced operations in September, 1962 in response to the need for a stock request in Nigeria( Osaze, 2002). Before now, all savings and deposits for purchase of securities went through the banking system. This has since stopped at the arrival of the capital request.

Hence, the Nigerian Stock Exchange( NSE) is the capitals of the capital request, pivot ground which every exertion of the capital request revolves. This makes it unique in the area of long term rallying and application of finances.

Factors Of The Capital Request

The capital request isn’t a single reality but a network of rather technical fiscal institutions that bring together suppliers and druggies of capital, as explained by Okereke( 2002).

Osaze( 2000) viewed it has being made up of several fiscal institutions which serve as fiscal interposers for carrying long term finances.

Al- Faki Musa( 2006 lecture delivered) sees the element of the capital request as being comprises of a lot of players performing colorful functions. He distributed them into two major groups

Controllers

Statutory/ Apex Regulation This is the Securities and Exchange Commission( SEC).

Self Regulatory Organization( SRO)e.g the Nigerian Stock Exchange( NSE) and the Abuja Commodities and Securities Exchange( ACSE). Also, the Central Bank of Nigeria( CBN) and the Ministry of Finance.

Drivers/ Advisers

Fund providers and investors They include individualities, institutional/ investors similar as insurance companies, pension finances, unit and investment trust, commercial bodies, adventure financesetc.

Fund druggies These include government and companies.

fiscal interposers They include securities dealers, stock broking enterprises and their agents, issuing houses, under- pens, registers, law- enterprises, transfer and entering agents,etc.

Investment Advisers These correspond of investment counsels and their representatives, portfolio directors and standing agencies.

Statement Of Research Problem

The Nigeria Stock Exchange isn’t well- developed. There’s lack of professed man- power and specialized know- style in the request. This results in the incapability of the exchange request to carry out its main function which is to grease the channeling of long term finances for investment purpose. This underdevelopment nature of the capital request in Nigeria has redounded to low development because investors aren’t satisfied with the conditioning of the capital request. This has redounded to low volume of trade in the Stock Exchange, and also trading outside the bottom of the Nigerian Stock Exchange immorally has created problem of poor development for the stock request.

The stock request lacks government patronage largely and to some commercial bodies too. This is due to lack of mindfulness of the request’s operations by the public. Also, there’s low table and request attentionetc.( Osamwonyi, 2006; lecture delivered). The government seems to calculate heavily on the plutocrat request for finance rather of the capital request.

Grounded on these points over, this study or exploration work will be geared towards answering the following exploration questions;

Is there important mindfulness of the stock request operations by the public?

Will lesser mindfulness increase the application o the request by the public?

Is there any volition to increase the transnational participation in the request?

What should be done in order to increase or to ameliorate the trade and purchase of equities stocks in the request?

How has the request faired in channelizing finances for investment and profitable development purpose?

It the request developed?

Will more operations and patronage and high standard of the request help in rapid-fire profitable development through capital investment?

ideal OF THE STUDY

The main ideal of the study is to critically estimate the part of the capital request.

Other specific objects of this study are as follows;

To examine the workings and operations of the stock request.

To examine the table demand of the Nigeria Stock Exchange( NSE) and the benefits of the capital request.

To examine the legal frame and nonsupervisory agencies in the Nigerian capital request.

To identify the actors in the capital request.

To have an overview of the equity capital request internationally.

To identify the objects and ascertain how far it has been suitable to achieve its stated objects.

To examine the problems of the request

To make recommendations.

Statement Of Research Hypothesis

suppositions are frequently state4d in the form of a relationship between a dependent variable( x) and an independent variable( y). For the purpose of this exploration work, the suppositions formulated are as follows;

Null thesis( H0) Volume of deals( VOT) has no positive relationship with request capitalization( MCAP).

Indispensable thesis( H1) All- share indicator( ASI) ahs a significant relationship with request capitalization( MCAP).

Significance Of The Study

This study is significant in the sense that its findings will be useful to intending investors, scholars, share holders, government and the general public.

The following are some of the achievement of this study;

To arise investor’s interest as they will be better informed to patronize the request in order to boost the conditioning of the request.

Account, Banking and Finance, Business Administration and Economics scholars will find it useful as a reference documents in unborn inquiries.

The study will serve to produce a better mindfulness to the general public.

The path to development and enhancement in the standard of the request operations will be exposed, which if well followed will ameliorate the state of the frugality.

It’ll help the government most especially to raise fund for investment systems.

Compass Of The Study

This study focuses on the operations of the capital request particularly in relationship to equity purchase. The study will cover the period of 27 times. Theoretically, the study will cover the period “ between ” 1980- 2007 empirically; the study will cover the period “ between ” 1985- 2006 due to the fact that the major exploration institutions similar as the Central Bank of Nigeria( CBN) and the Nigeria Stock Exchange( NSE) warrant current data to carry out a comprehensive work. The study will assesses capital request conditioning encyclopedically, but will concentrate further attention on the Nigeria frugality.

Exploration Methodology

The date to be used for the empirical analysis will be attained from secondary sources which includeC.B.N statistical Bulletin, volume 17; December 2006 and NSE, SEC publications. The data will enable us test our thesis and eventually conclude grounded on our retrogression results.

Limitations Of The Study

This exploration content in no mistrustfulness is a wide one, but due to limited time, as the exploration work was carried out along side with other academic work, finance was also a constraint to this exploration work.

Again, lack of current data and shy exploration institutions posed a problem. Some of the exploration institutions demanded current data and information for effective exploration.

The above mentioned and précised problems are some of the multitudinous problems not stated.