Global Jou nal o Economic and
Finance Resea ch
Vol. 02(10): 1064-1075, Oc obe 2025
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e-ISSN: 3050-5348
p-ISSN: 3050-533X
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1064
How Ins i u ional Quali y D i es Financial Ad ancemen in Sub-Saha an
A ica
D . Adeyinka Emmanuel Adeyemi1, Chikaodinaka Okwunka2, Pa ience. N. Tasie3
1Depa men o Coope a i e Economics, Ogbonnaya Onu Poly echnic, Aba, Abia S a e. h ps://o cid.o g/0000-0002-0737-1248
2Depa men o Coope a i e Economics, Ogbonnaya Onu Poly echnic, Aba, Abia S a e.
3Depa men o Business Adminis a ion, Ogbonnaya Onu Poly echnic, Aba, Abia S a e.
INTRODUCTION
Financial ad ancemen o de elopmen e e s o imp o ing and expanding inancial ma ke s and ins i u ions, which acili a e he
e icien alloca ion o esou ces, isk managemen , and economic g ow h. I encompasses es ablishing and enhancing inancial
ins umen s, ma ke s, and in e media ies ha mobilize sa ings, alloca e capi al, and acili a e ade (Khan e al., 2020). Financial
de elopmen /ad ancemen also in ol es egula o y amewo ks ha ensu e s abili y, anspa ency, and us in he inancial sys em.
The ul ima e goal is o c ea e a obus inancial in as uc u e ha suppo s sus ainable economic de elopmen and imp o es access
o inancial se ices o all segmen s o socie y (Kwakwa e al., 2023).
Globally, inancial de elopmen /ad ancemen has been a key d i e o economic g ow h, especially in de eloped economies.
Ad anced inancial sys ems, cha ac e ized by di e se and deep capi al ma ke s, sophis ica ed inancial ins umen s, and well-
egula ed ins i u ions, ha e signi ican ly con ibu ed o inno a ion, p oduc i i y, and economic s abili y. Fo ins ance, he Uni ed
S a es and Wes e n Eu ope ha e long bene i ed om ma u e inancial ma ke s ha suppo business expansion and consume
spending. Eme ging ma ke s, pa icula ly in Asia and La in Ame ica, ha e also made conside able s ides in inancial de elopmen ,
le e aging echnological ad ancemen s and egula o y e o ms o deepen hei inancial sec o s. Global inancial in eg a ion has
acili a ed c oss-bo de in es men s and capi al lows, u he enhancing economic g ow h and de elopmen (Global Financial
Repo , 2020).
In sub-Saha an A ica, inancial de elopmen /ad ancemen has been une en and gene ally lags behind o he egions. While some
coun ies ha e made no able imp o emen s, many A ican na ions s ill s uggle wi h unde de eloped inancial sys ems cha ac e ized
by limi ed access o inancial se ices, shallow capi al ma ke s, and inadequa e egula o y amewo ks (Us a z & Fan a, 2021).
Sou h A ica and Nige ia, o example, ha e ela i ely ad anced inancial sec o s compa ed o hei egional pee s, bu many o he
coun ies in he egion emain hea ily elian on in o mal inancial sys ems. Mobile banking and in ech inno a ions ha e shown
p omise in b idging some o hese gaps, pa icula ly in Eas A ica, whe e mobile money pla o ms like M-Pesa ha e e olu ionized
KEYWORDS: Ins i u ional Quali y,
Financial Ad ancemen , Pea son
Co ela ion, Panel Es ima ion.
Co esponding Au ho :
D . Adeyinka Emmanuel Adeyemi
Publica ion Da e: 10 Oc obe -2025
DOI: 10.55677/GJEFR/09-2025-Vol02E10
License:
This is an open access a icle unde he CC
BY 4.0 license:
h ps://c ea i ecommons.o g/licenses/by/4.0/
ABSTRACT
This s udy in es iga es he impac o ins i u ional quali y on inancial
ad ancemen in Sub-Saha an A ica, le e aging ins i u ional heo y o guide
a iable selec ion and empi ical linkage. Employing a panel da ase , he s udy
uses desc ip i e s a is ics, Pea son co ela ion, uni oo , and mul icollinea i y
es s o assess a iable p ope ies, ollowed by panel es ima ion me hods,
including he Poolabili y, Hausman, and B eusch-Pagan es s, o selec he bes
model i . The esul s indica e ha lowe ins i u ional quali y signi ican ly
educes inancial ad ancemen , as con i med ac oss Fixed, Random, and PCSE
models. Real in e es a es posi i ely co ela e wi h inancial ad ancemen ,
while GDP pe capi a and in la ion e ec s a e insigni ican . The Dumi escu-
Hu lin es e eals a unidi ec ional causali y om ins i u ional quali y o
inancial ad ancemen , sugges ing ins i u ional quali y as a p edic o . The
indings emphasize he impo ance o s eng hening ins i u ional amewo ks o
os e inancial ad ancemen and ecommending policy e o ms o enhance
go e nance and economic s abili y o sus ainable egional de elopmen
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1065
access o inancial se ices. Se e al challenges hinde inancial de elopmen in sub-Saha an A ica. Key issues include inadequa e
in as uc u e, bo h physical and echnological, which limi s he each and e iciency o inancial se ices. Poli ical ins abili y and
weak egula o y en i onmen s u he unde mine con idence in inancial ins i u ions and de e in es men . A la ge in o mal
economy and low le els o inancial li e acy among he popula ion es ic he adop ion o o mal inancial se ices. High le els o
po e y and income inequali y also exace ba e he di icul y in expanding inancial inclusion.
Se e al s udies ha e in es iga ed he ac o s ha in luence inancial de elopmen in A ica and he wo ld as a whole (see: Ash a e
al., 2018; Bashi u e al., 2023; Tongu ai & Vi hesson hi, 2023; Hussain e al., 2021). Mos o hese s udies ha e exposed ac o s like
openness (Ash a e al., 2018); socioeconomic (Bashi u e al., 2023); and na u al esou ces (Shahbaz e al., 2018) among o he s as
de e minan s o inancial de elopmen . In ecen imes, s udies ha e ocused on he in luence o echnology and ins i u ional quali y
as ac o s ha in luence he inancial sys em (see: Akinlo, 2023; Asongu & Nwachukwu, 2019; Cha eddine, Umlai, & El Mas i,
2024). Howe e , much has no been done in he a ea o ins i u ional quali y and how i a ec s inancial de elopmen , especially in
he sub-Saha an egion as mos o he coun ies om his egion ace ins i u ional issues such as co up ion, lack o ule o law, and
go e nmen ine iciency among o he s. To con inue wi h he deba e on how ins i u ional quali y can in luence inancial de elopmen ,
and o con ibu e o he li e a u e, his s udy ends o in es iga e he in luence o ins i u ional quali y on sub-Saha an A ican inancial
de elopmen .
This s udy is essen ial because i con ibu es o exis ing esea ch ega ding he impac o ins i u ional quali y on inancial
de elopmen in sub-Saha an A ica. While a ious ac o s in luencing inancial de elopmen ha e been iden i ied, he speci ic
in luence o ins i u ional issues like co up ion, lack o ule o law, and go e nmen ine iciency emains unde explo ed in his
egion. Gi en he unique challenges sub-Saha an A ican coun ies ace, his s udy aims o con ibu e o he li e a u e by p o iding
insigh s ha could in o m policy decisions and s a egies o enhance inancial de elopmen , he eby p omo ing economic g ow h
and s abili y.
1. RELATED LITERATURE REVIEW
As a sequel o he impac o inancial de elopmen on economic g ow h, se e al s udies ha e ocused on he de e minan s o
inancial de elopmen o e ime. Huang (2006), employing panel da a echniques on in o ma ion spanning 43 de eloping coun ies
om 1970 o 1998, conduc ed a ho ough examina ion o he causali y ela ionship be ween agg ega e p i a e in es men and
inancial de elopmen . Th ough GMM es ima ion on a e aged da a and a common ac o app oach on annual da a, accommoda ing
uni e sal in e dependence and he e ogenei y ac oss coun ies, he esul s suppo posi i e causal e ec s in bo h di ec ions.
Bal agi e al (2007), using panel da a echniques and annual da a, p o ed ha ade openness and inancial openness oge he wi h
economic ins i u ions de e mine he inancial de elopmen dissimila i y ac oss coun ies. Thei esul s showed ha leas open
coun ies can bene i g ea ly in e ms o inancial de elopmen i hey open ei he hei ade o capi al accoun s. Adam and
Tweneboah (2008) examine he impac o o eign di ec in es men (FDI) on he s ock ma ke de elopmen in Ghana using
mul i a ia e coin eg a ion and e o co ec ion models. The empi ical esul s om he s udy showed ha he e is a long- un
ela ionship be ween o eign di ec in es men , nominal exchange a e, and s ock ma ke de elopmen in Ghana.
The ac o s ha in luence inancial de elopmen we e examined by Voghouei e al. in 2011. Ins i u ions, openness o ade and
inancial ma ke s, legal adi ion, and poli ical economy a e iden i ied as ac o s p omo ing he inancial sys em. Poli ical and
economic ac o s migh be he ones ha ha e he g ea es in luence on inancial de elopmen because hey can a ec i di ec ly as
well as indi ec ly h ough o he de e minan s. Va ia ions in he poli ical economy o coun ies could well explain a ia ions in hei
inancial de elopmen . Bi encou (2011) obse ed he in luence o in la ion on inancial de elopmen in B azil using ime-se ies
da a ha co e he pe iod be ween 1985 and 2004. The s udy employs panel ime se ies and panel da a analyses. The empi ical
esul s sugges ha in la ion p esen ed ha m ul e ec s on inancial de elopmen du ing he pe iod in es iga ed. Acco ding o he
au ho , he main in e ence o he esul s is ha poo mac oeconomic pe o mance has nega i e e ec s on inancial de elopmen .
Im an and Nisha (2012) conduc ed a s udy on de e minan s o bank c edi in Pakis an, using he supply-side app oach o he pe iod
be ween 1971 and 2010. The s udy employs he ARDL me hod. Concluded ha in he long un o eign liabili ies, domes ic deposi s,
economic g ow h, exchange a e, and mone a y condi ions (p oxy by M2 as a pe cen age o GDP) ha e signi ican and posi i e
associa ions wi h p i a e c edi , while in la ion and money ma ke a e do no a ec p i a e c edi . Likewise, in he sho - un, all
he ac o s a e signi ican and posi i ely connec ed wi h p i a e c edi excep domes ic deposi and in la ion which do no a ec he
p i a e c edi in Pakis an. The au ho s specula e ha because banks do no immedia ely g an c edi s om he cu en deposi s made
by accoun holde s, domes ic deposi s may no ha e a sho - e m impac on bank c edi . Finally, he esea che sough o iden i y
he in luence o inancial libe aliza ion on bank c edi , using i as a dummy a iable. Howe e , he esul does no show any impac
o he inancial libe aliza ion on bank c edi in Pakis an.
Takyi and Obeng (2013), using he Au o eg essi e Dis ibu ed Lag (ARDL) app oach, in es iga e he de e minan s o inancial
de elopmen in Ghana using qua e ly da a om 1988 o 2010. The s udy ound a unique coin eg a ing ela ionship be ween
inancial de elopmen ade openness, in la ion, pe capi a income, ese e equi emen , and go e nmen bo owing. The eg ession
esul s showed ha ade openness and pe capi a income a e impo an de e minan s o inancial de elopmen in Ghana.
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1066
Addi ionally, in la ion, in e es a e, and ese e equi emen exe cised nega i e and s a is ically signi ican e ec s on inancial
de elopmen bo h in he sho - un and long- un sugges ing ha hese a iables ad e sely in luence inancial de elopmen in Ghana.
Howe e , go e nmen bo owing did no ha e any signi ican e ec on inancial de elopmen bo h in he long un and sho un
sugges ing ha highe go e nmen bo owing om he banking sec o will no ha e any signi ican e ec on p i a e c edi o e en
c owd in p i a e sec o c edi .
Asse a (2014) examines he sho and long- un impac o bank mone a y policy and mac oeconomic a iables such as domes ic
deposi , o eign liabili ies, lending in e es a e, and ese e equi emen , M2 as a pe cen age o GDP, GDP and in la ion on bank
c edi o he p i a e sec o in E hiopia, using da a om 1978 o 2011. The me hodology, based on he ARDL econome ic app oach
using annual ime-se ies da a was employed. The inding speci ied ha domes ic deposi s, o eign liabili ies, eal lending in e es
a e, M2 as a pe cen age o NGDP, GDP, and in la ion ha e signi ican impac s on banks' c edi o he p i a e sec o in he long un.
Whe eas ese e equi emen s did no a ec comme cial banks' c edi o he p i a e sec o bo h in he long and sho un. Domes ic
deposi g ow h and economic expansion ha e li le e ec on comme cial banks' sho - e m lending o he p i a e sec o . The esul
showed a apid adjus men p ocess and dic a es ha he disequilib ium o he p e ious pe iod shocks is adjus ed in o long- un
equilib ium in he cu en pe iod.
Shabbi e al (2020) s udied he de e minan s o inancial de elopmen in Pakis an and collec ed da a be ween 1995 and 2015 using
eg ession analysis and co ela ion analyses. They used i e ac o s and measu ed hei impac on inancial de elopmen . Fac o s
such as In la ion, ade openness, ma ke capi aliza ion, in es men a e, and in e es a e we e used o measu e hei ole as
de e minan s o inancial de elopmen . The empi ical esul s show ha all a iables in la ion, ade openness, ma ke capi aliza ion,
in es men a e, and in e es a e ha e a signi ican impac on inancial de elopmen .
Howe e , in ecen imes, se e al schola s ha e del ed in o he impac o go e nance and ins i u ional quali y on inancial
de elopmen and i con inues. Ola inde and Yahaya (2018) in es iga ed he impac o ins i u ions and policies on g ow h
con e gence in A ica, employing a ious panel modeling me hods on a da ase encompassing 50 A ican coun ies om 1990-
2014. The indings e ealed he exis ence o condi ional con e gence among hese na ions. No ably, echnology accumula ion and
iscal policy indica o s exhibi a posi i e associa ion wi h g ow h. In con as , nega i e in luences on g ow h s em om human
esou ces, mone a y policy indica o s, and ine ec i e ins i u ions, he la e o en linked o poo de elopmen . The s udy concludes
ha , despi e he signi icance o adi ional g ow h a iables and policies in income g ow h, hei e icacy is limi ed in an en i onmen
cha ac e ized by ex ac i e and absolu is ins i u ions.
Ali e al. (2022) in es iga ed he impac o ins i u ional quali y as a mode a ing ac o in he ela ionship be ween inancial inclusion
and subs an ial inancial de elopmen ac oss 45 coun ies in he O ganiza ion o Islamic Coope a ion. The s udy u ilized panel da a
spanning om 2000 o 2016. I employed he A ellano–Bond gene alized me hod o momen s (GMM) and wo-s age leas -squa es
(2SLS) o es ima ions, p oducing signi ican and mul i ace ed esul s. The empi ical indings alida e a s a is ically signi ican
posi i e co ela ion among inancial inclusion, ins i u ional quali y, and inancial de elopmen . The s udy's e ela ion is no ewo hy
ha ins i u ional quali y signi ican ly mode a es inancial inclusion, con ibu ing a subs an ial posi i e impac on o e all inancial
de elopmen . Che i and D ege (2016) examine he de e minan s o inancial de elopmen in he Middle Eas and No h A ican
(MENA) coun ies. The s udy employs panel econome ic me hods o assess ad ancemen s in he banking sec o and he s ock
ma ke . A no ewo hy disco e y is ha ins i u ional ac o s hold signi icance in bo h inancial domains, e en when con olling o
s anda d mac oeconomic de e minan s and ixed e ec s. In he banking sec o , co up ion s ands ou as he mos pi o al ac o ,
whe eas in he s ock ma ke , he in luence o co up ion and he s a e o law and o de is conside ed signi ican .
Fhima (2018) in es iga es he impac o co up ion on bo h he s abili y o he banking sec o and economic de elopmen , employing
he h ee-s age leas squa es o es ima ion. The esul s indica e ha co up ion exe s a conside able ad e se in luence on bo h
inancial s abili y and economic g ow h. In a ela ed s udy, Abuzayed and Fayoumi (2016) explo e he connec ion be ween economic
g ow h and banking sec o concen a ion, conside ing he ole o ins i u ional quali y. The esea ch ocuses on a sample o 15 Middle
Eas and No h A ican (MENA) coun ies spanning he yea s 1996 o 2010. Th ough s a ic and dynamic panel da a analysis, he
indings e eal a posi i e and s a is ically signi ican co ela ion be ween economic g ow h and bo h banking concen a ion and
ins i u ional quali y. These esul s suppo he no ion ha banking concen a ion and ins i u ional quali y a e c ucial ac o s
in luencing g ow h in MENA coun ies. The s udy highligh s a no ewo hy nega i e and signi ican ela ionship be ween he
in e ac ion a iable ep esen ing he combina ion o concen a ion and ins i u ional quali y.
Ema a and Jhonsa (2014) u ilized a Two-s age Leas Squa e (TSLS) eg ession app oach on c oss-sec ional da a ep esen ing 197
coun ies in he yea 2009 o e alua e he in luence o imp o emen s in go e nance quali y on pe capi a income, as well as he
impac o inc eases in pe capi a income on go e nance quali y. The esul s e eal a obus and s a is ically signi ican causa ion
om go e nance quali y o pe capi a income. The indings show a s a is ically signi ican co ela ion be ween pe capi a income
and go e nance quali y. In a ela ed s udy, Deme iades and Hook Law (2006) obse ed ha a obus ins i u ional amewo k wi hin
which he inancial sys em ope a es enhances he posi i e impac o inancial de elopmen on GDP pe capi a.
Hussain e al (2021) add ess he c i ical issue o sus ainable de elopmen , ocusing on he o en-deba ed ole o na u al esou ces
and ex ending he discou se o include human capi al, inno a ion, and ins i u ional quali y. The s udy employs ad anced econome ic
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1067
echniques, including he dynamic common co ela ed e ec es ima o , c oss-sec ional au o eg essi e dis ibu i e lag (CS-ARDL),
augmen ed mean g oup (AMG), and common co ela ed e ec mean g oup (CCE-MG) es ima o s, o explo e he in e connec ions.
The indings e eal ha in hese high-income, esou ce- ich coun ies, na u al esou ces ac as blessings a he han cu ses. Human
capi al signi ican ly p omo es inancial de elopmen , and ins i u ional quali y also suppo s inancial de elopmen . These esul s
indica e ha he e icien u iliza ion o bo h na u al and human esou ces, bols e ed by echnological inno a ion, enables high-
income coun ies o achie e hei de elopmen goals.
Also, Khan e al (2020) explo e he ela ionship be ween na u al esou ce en and inancial de elopmen , ocusing on he ole o
ins i u ional quali y in his dynamic ac oss 87 Eme ging and De eloping Economies (EMDEs) om 1984 o 2018. The s udy inds
ha na u al esou ce en gene ally weakens inancial de elopmen , suppo ing he na u al esou ce cu se hypo hesis wi hin he
inancial sec o o EMDEs. Howe e , ins i u ional quali y has a signi ican posi i e impac on inancial de elopmen and mode a es
he ad e se e ec s o na u al esou ce en . The au ho s a gue ha ins i u ional quali y can ans o m he na u al esou ce cu se in o
a blessing o he inancial sec o by in luencing a ious channels h ough which he cu se ope a es. Fu he mo e, he s udy iden i ies
a h eshold e ec o ins i u ional quali y in he esou ce- inance ela ionship, e ealing ha na u al esou ce en posi i ely
con ibu es o inancial de elopmen only when ins i u ional quali y su passes a ce ain h eshold le el. Below his h eshold, na u al
esou ce en hinde s inancial de elopmen , ein o cing he esou ce cu se. These indings emphasize he c ucial ole o ins i u ional
quali y in mi iga ing he nega i e e ec s o na u al esou ce dependence on inancial de elopmen . Li e al. (2021) ein es iga ed
he esou ce cu se hypo hesis wi h a ocus on he ins i u ional ailu e hypo hesis in G7 coun ies. Th ough e alua ion o na u al
esou ce en s' linkages wi h inancial de elopmen o e ou decades, hey e u e he esou ce cu se hypo hesis in he long un and
iden i y a posi i e impac ou ed h ough inancial ma ke s, wi h e idence o bleeding in inancial ins i u ions due o na u al esou ce
abundance.
Bawuah (2023) examines he ole o ins i u ional quali y in he ela ionship be ween mobile money and inancial inclusion in Ghana.
Th ough baseline eg ession analysis om 2014 o 2021, hey ind a posi i e di ec e ec o ins i u ional quali y and mobile money
on inancial inclusion, along wi h a posi i e mode a ing ole o ins i u ional quali y in his ela ionship. Rubio Misas (2023)
in es iga es he in luence o ins i u ional quali y on he impac o supe iso y powe on insu e soundness. Using a wo-s ep sys em
gene alized me hod o momen s o e he pe iod 2009–2016, hey ind ha na ional ins i u ional quali y mi iga es he nega i e impac
o supe iso y powe on insu e soundness. Ongo Nkoa e al (2023) examine he e ec o poli ical and legal ins i u ions on he
g ow h o inancial ma ke s in 50 A ican coun ies. Employing a sys em gene alized me hod o momen s a egy, hey ind ha he
quali y o poli ical and legal ins i u ions explains inancial ma ke g ow h.
Sajid e al (2023) explo e he associa ion o inancial inclusion and ins i u ional quali y wi h inancial s abili y, employing a linea
au o eg essi e dis ibu ed lag app oach om 1990 o 2020. Thei indings e eal a posi i e associa ion o inancial inclusion and
ins i u ional quali y wi h inancial s abili y. Khan e al (2024) ocus on he in luence o go e nance quali y on s ock ma ke
de elopmen in BRICS na ions om 2007 o 2021. Th ough panel da a eg ession, hey ind ha go e nance indica o s such as
Go e nmen E ec i eness, Rule o Law, and Voice and Accoun abili y signi ican ly a ec s ock ma ke de elopmen . Pal and
Mahalik (2024) in es iga e he e ec s o emi ances, o eign di ec in es men (FDI), and ins i u ional quali y on inancial
de elopmen in Eu ope & Cen al Asia s. Sub-Saha an A ica. U ilizing a panel PMG-ARDL model o e he pe iod 1984–2020,
hey iden i y a ying impac s o hese ac o s on inancial de elopmen be ween he wo egions.
Despi e wide esea ch on he de e minan s o inancial de elopmen , he speci ic ole o ins i u ional quali y in shaping inancial
ad ancemen in sub-Saha an A ica emains unde explo ed. Exis ing s udies, such as hose by Huang (2006), Bal agi e al (2007),
and Adam and Tweneboah (2008), p ima ily ocus on mac oeconomic ac o s, ade openness, and o eign di ec in es men as key
d i e s o inancial de elopmen . While Voghouei e al (2011) and Che i and D ege (2016) highligh he impo ance o ins i u ions
in inancial de elopmen , hei esea ch is no egion-speci ic and o en encompasses b oade geog aphic con ex s. Recen
in es iga ions by Ola inde and Yahaya (2018), Ali e al (2022), and Khan e al (2020) emphasize he signi icance o ins i u ional
quali y bu ocus on di e en egions, such as he Middle Eas and No h A ica (MENA) o high-income coun ies, o add ess
inancial de elopmen indi ec ly h ough he lens o economic g ow h o na u al esou ce managemen . As a sequel o his, he e is
a gap in he li e a u e ega ding he di ec impac o ins i u ional quali y on inancial de elopmen /ad ancemen speci ically wi hin
he sub-Saha an A ican amewo k. This gap highligh s he need o a ge ed esea ch o unde s and how ins i u ional ac o s
uniquely in luence inancial de elopmen in his egion, conside ing i s dis inc economic, poli ical, and social dynamics.
2. METHODOLOGY
i. Theo e ical F amewo k
This s udy d aws i s heo e ical ounda ion om ins i u ional heo y. The ins i u ional heo y posi s ha o ganiza ions and hei
beha io a e shaped by he ins i u ional en i onmen in which hey ope a e, including no ms, alues, belie s, egula o y amewo ks,
laws and policies, and cul u al, and social expec a ions. These ins i u ional ac o s in luence o ganiza ional s uc u es, p ac ices, and
ou comes. They can also lead o simila i ies among o ganiza ions, legi imacy, epu a ion, access o esou ces and suppo , and
cons ain s on inno a ion and change. I is as a sequel o his Asbackd op ha his s udy ends o in es iga e he e ec o ins i u ional
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1068
quali y on inancial ma ke de elopmen ia in o ma ion and communica ion echnology. Meanwhile, pas s udies (Khan e al.,
2023; Nkoa e al., 2023) ha e ocused on he impac o ins i u ional quali y on he inancial ma ke . Fo ins ance, Khan e al (2023)
show ha go e nance indica o s such as Go e nmen E ec i eness, Rule o Law, and Voice and Accoun abili y signi ican ly a ec
s ock ma ke de elopmen . While Nkoa e al (2023) ind ha inancial ma ke g ow h is explained by he quali y o poli ical and
legal ins i u ions.
ii. Model Speci ica ions
To in es iga e he impac o Ins i u ional quali y on inancial ad ancemen , he s udy d aws a ounda ion om he ins i u ional
heo y which helps he choice o explana o y a iables o he s udy and links he heo e ical and empi ical amewo ks. As a sequel
o his, he model o inancial ad ancemen is gi en hus in equa ion 1:
Finde = (Ins i , Gdppci , In i , In i ) -------------------------------------------- (1)
By sugges ing a linea econome ic ela ionship be ween inancial ad ancemen and i s sugges ed de e minan s, and a e adding
he in e cep and e o e ms α0 and µ𝑖𝑡 espec i ely. Thus, he econome ic model speci ied o es ima ion is as shown in Equa ion
2 below:
𝑓𝑖𝑛𝑑𝑒𝑣𝑖𝑡 = ∝0+ ∝1𝐼𝑛𝑠𝑡𝑖𝑡 + ∝2𝐺𝑑𝑝𝑝𝑐𝑖𝑡 + ∝3𝐼𝑛𝑡𝑟𝑖𝑡 + ∝4𝐼𝑛𝑓𝑖𝑡 + µ𝑖𝑡 … (2)
whe e:
Finde = Financial de elopmen
Ins = Ins i u ional quali y
Gdppc = G oss domes ic p oduc pe capi a
In = In e es a e
In = In la ion
∝1 𝑡𝑜 ∝6= coe icien o he independen a iables
µ𝑖𝑡 = E o e m
i = coun y in he panel;
= yea in he panel
Based on he model speci ied abo e wi h he heo e ical and empi ical jus i ica ions ha ha e been discussed in he e iew o ela ed
li e a u e, he ollowing a e inequali y no a ions o he a p io i expec a ions o each o he pa ame e s o he model:
∝1 > 0 o < 0, ∝2 > 0 o < 0, ∝3 > 0 o < 0, and ∝4 < 0
To examine he di ec ion o causali y be ween inancial de elopmen , and Ins i u ional quali y in SSA, his s udy adop s he pai wise
Dumi escu-Hu lin (2012) panel causali y echnique. The explana ion o his is ha i is a dynamic panel es ha is mo e obus
and e ec i e in es ima ion. The Pai wise Dumi escu-Hu lin es was de eloped on he G ange causali y es and i s me i o e
G ange causali y is ha i add esses he endogenei y p oblem associa ed wi h he panel causali y es which is no conside ed by
G ange and o he causali y es s. Thus, he ollowing equa ions a e used o his s udy:
𝛥𝐹𝑖𝑛𝑑𝑒𝑣𝑖𝑡=𝛽1𝑗+∑𝜃1𝑖𝑘
𝑝1
𝑘=1 𝛥𝐼𝑛𝑠𝑡𝑖𝑡−𝑘+∑𝜑1𝑖𝑘
𝑝2
𝑘=1 𝛥𝐹𝑖𝑛𝑑𝑒𝑣𝑖𝑡−𝑘 + 𝜀1𝑖𝑡 … … … …… … …. 3
𝛥𝐼𝑛𝑠𝑡𝑖𝑡=𝛽1𝑗+∑𝜃1𝑖𝑘
𝑝1
𝑘=1 𝛥𝐹𝑖𝑛𝑑𝑒𝑣𝑖𝑡−𝑘+ ∑𝜑1𝑖𝑘
𝑝2
𝑘=1 𝛥𝐼𝑛𝑠𝑡𝑖𝑡−𝑘 + 𝜀1𝑖𝑡 … … … … … …… …. 4
whe e Δ is he i s di e ence ope a o ; p1 and p2 a e lag leng hs; i ep esen s he coun y in he panel (i = 1, 2,...N); is he yea in
he panel ( = 1, 2,...T); and εi deno es no mally dis ibu ed s ochas ic e m o all coun y i and a ime . All he emaining a iables
emain he same as s a ed in Equa ion 2.
iii. Va iables Desc ip ion and Measu emen .
Se e al schola s ha e used di e en a iables as indica o s o inancial ma ke de elopmen and o he a iables as inancial ma ke
de e minan s. This sec ion exposes he a iables employed as well as hei measu emen s o his s udy.
a. Financial Ma ke De elopmen
Financial de elopmen e e s o imp o ing and expanding inancial ma ke s and ins i u ions, which acili a e he e icien alloca ion
o esou ces, isk managemen , and economic g ow h. I encompasses es ablishing and enhancing inancial ins umen s, ma ke s,
and in e media ies ha mobilize sa ings, alloca e capi al, and acili a e ade (Khan e al., 2020). The Financial De elopmen Index
(FDI) is a comp ehensi e measu emen ool used o assess he le el o de elopmen and e iciency o a coun y's inancial sys em.
I is designed o p o ide insigh s in o he o e all heal h and unc ionali y o a na ion's inancial sec o by conside ing a ious aspec s
and dimensions.
b. Ins i u ional Quali y
Ins i u ional quali y e e s o he e ec i eness, e iciency, and in eg i y o ins i u ions in suppo ing economic de elopmen ,
go e nance, social s abili y, and o e all socie al well-being (Alonso & Ga cima ín, 2013). High-quali y ins i u ions con ibu e o a
conduci e en i onmen o economic g ow h, inno a ion, and social cohesion, while poo ins i u ional quali y can hinde
de elopmen and lead o co up ion, ine iciency, and social un es . Key componen s o ins i u ional quali y include go e nance,
legal sys ems, public adminis a ion, and egula o y amewo ks (Kunčič, 2014). Howe e , his s udy employs ins i u ional quali y
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1069
componen s such as con ol o co up ion, go e nmen e ec i eness, oice and accoun abili y, ule o law, and poli ical s abili y
om he Wo ld De elopmen Indica o s (WDI) o de i e he ins i u ional quali y index ia he P incipal Componen Analysis (PCA).
P incipal componen analysis (PCA) is used o combine he esidual se ies p oduced by each eg ession. The ollowing linea
combina ion exis s because he i s eigen ec o s om he PCA a e u ilized as he necessa y weigh s o p oduce an agg ega ed index
o ins i u ional quali y:
Ins = α1Co + α 2Go e + α 3Pols ab + α 4Rulaw + α 5Voca
Whe e Ins is ins i u ional quali y, α1, α2, α3, α4, and α5 a e he eigen ec o om he P incipal Componen Analysis (PCA), Co is
con ol o co up ion, Go e is go e nmen e ec i eness, Pols ab is poli ical s abili y, Rulaw is ule o law, and Voca is oice and
accoun abili y.
c. G oss Domes ic P oduc pe capi a
G oss Domes ic P oduc pe capi a (Gdppc) measu es a coun y's economic ou pu ha accoun s o i s numbe o people. I is
calcula ed by di iding he GDP by he o al popula ion o he coun y. This me ic p o ides an a e age economic p oduc i i y o
s anda d o li ing o an indi idual wi hin he coun y and is o en used o compa e he economic pe o mance o di e en coun ies
o egions. Highe GDP pe capi a indica es a highe s anda d o li ing and be e economic well-being o he popula ion. GDP pe
capi a is a c ucial indica o o he po en ial o inancial ma ke de elopmen , e lec ing he o e all economic heal h and he capaci y
o a coun y o suppo and sus ain a ib an inancial sec o .
d. In e es Ra e
In e es a es, as he cos o bo owing money o he e u n on in es men s, exe signi ican in luence o e bo h he economy and
inancial ma ke s. They di ec ly impac bo owing cos s, wi h highe a es making bo owing mo e expensi e and lowe a es
incen i izing bo owing and in es men . Simila ly, in e es a es a ec sa ings and in es men beha io : highe a es encou age
sa ing due o be e e u ns, while lowe a es p omp indi iduals and businesses o seek highe -yield in es men s. Financial ma ke s
a e deeply in luenced, as in e es a es a ec he alua ion o asse s such as bonds and s ocks.
e. In la ion
In la ion e e s o he a e a which he gene al le el o p ices o goods and se ices ises o e ime, leading o a dec ease in he
pu chasing powe o money. When in la ion occu s, each uni o cu ency buys ewe goods and se ices han i did be o e. In la ion
is measu ed by a ious indices, such as he Consume P ice Index (CPI) and he P oduce P ice Index (PPI), which ack changes
in he p ices o a baske o goods and se ices o e ime. In la ion in luences inancial ma ke s h ough i s impac on in e es a es,
in es o sen imen , asse alua ions, and cu ency alues.
Table 1: Summa y o he Da a
Va iable
Indica o
Va iable desc ip ion
Uni o
measu emen
Sou ce o da a
Finde
Financial
de elopmen
The Financial De elopmen Index (FDI) is a
comp ehensi e measu emen ool used o assess he le el
o de elopmen and e iciency o a coun y's inancial
sys em. I is designed o p o ide insigh s in o he o e all
heal h and unc ionali y o a na ion's inancial sec o by
conside ing a ious aspec s and dimensions.
Index
In e na ional
Mone a y Funds
(IMF), 2022
Ins
Ins i u ional quali y
P oxy by he con ol o co up ion, go e nmen
e ec i eness, oice and accoun abili y, ule o law, and
poli ical s abili y
Index
Au ho ’s
calcula ion
(PCA)
Gdppc
G oss domes ic
p oduc pe capi a
GDP pe capi a (cons an 2015 US$)
Million,
Billion ($)
Wo ld Bank,
2022
In
Real In e es a e
The pe cen age a which in e es is paid on a loan o
in es men . The eal in e es a e is adjus ed o in la ion,
e lec ing he ac ual pu chasing powe o he in e es
ea ned o paid.
Pe cen age
Wo ld Bank,
2022
In
In la ion
The pe cen age in he consume p ice index (CPI), is a
weigh ed a e age o p ices o a baske o goods and
se ices.
Pe cen age
Wo ld Bank,
2022
Sou ce: In e na ional Mone a y Fund, 2022, and Wo ld Bank De elopmen Index, 2022.
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1070
i . Da a Sou ce
The da ase o his s udy consis s o a panel o obse a ions o 36 sub-Saha an A ican coun ies, co e ing annual da a om 2000
o 2021. This sample is used o examine he impac o ins i u ional quali y on inancial de elopmen . The coun ies included a e
Angola, Benin, Bo swana, Bu kina Faso, Cape Ve de, Came oon, Cen al A ica, Chad, Como os, DR Congo, Republic o Congo,
Cô e d'I oi e, E hiopia, Gabon, Gambia, Ghana, Guinea, Guinea Bissau, Kenya, Libe ia, Libe ia, Madagasca , Malawi, Mau i ania,
Mau i ius, Mozambique, Namibia, Nige , Nige ia, Rwanda, Senegal, Seychelles, Sou h A ica, Sudan, Tanzania, Togo, and Zambia.
Da a sou ces include he Wo ld De elopmen Index om he Wo ld Bank and he Financial De elopmen Index om he
In e na ional Mone a y Fund.
. Analy ical Techniques
Be o e es ima ing he model, a desc ip i e analysis o he key a iables will be conduc ed using desc ip i e s a is ics o unde s and
hei beha io and ela ionships. This includes p o iding es ima es o he numbe o obse a ions, mean, s anda d de ia ion,
minimum, and maximum alues ac oss coun ies and ime, ac oss coun ies, and wi hin each coun y o e ime. Pea son co ela ion
measu es he linea ela ionships be ween a iables, whe e alues close o +1 indica e a s ong posi i e co ela ion and alues close
o -1 indica e a s ong nega i e co ela ion. To de ec mul icollinea i y, he co ela ion coe icien s o each a iable pai will be
examined.
To a oid spu ious eg ession esul s, s a iona i y es s a e conduc ed. Di e en panel uni oo es s add ess conce ns like
homogenei y, c oss-sec ional dependence, and small sample bias, which can a ec dynamic panel analysis. The s udy uses he
Augmen ed Dickey-Fulle (ADF) es ia he Le in-Lin-Chu (LLC) and Im-Pesa an-Shin (IPS) me hods o check o s a iona i y
and he o de o in eg a ion. The LLC me hod accoun s o in e cep he e ogenei y, while he IPS me hod add esses he e ogenei y
in in e cep s and slope coe icien s. These me hods a e widely used and consis en in panel uni oo es s.
The s udy employs s a ic panel analysis. S a ic panel analysis is a s a is ical me hod used o analyze da a collec ed o e ime om
mul iple indi iduals, en i ies, o g oups. I is commonly employed in econome ics and social sciences o s udy he ela ionships
be ween a iables while accoun ing o indi idual and ime-speci ic e ec s. The e a e h ee main models wi hin s a ic panel analysis:
O dina y Leas Squa es (OLS), Fixed E ec Model, and Random E ec Model. OLS is a s anda d eg ession echnique used o
es ima e he ela ionship be ween a dependen a iable and one o mo e independen a iables while he ixed e ec model accoun s
o indi idual-speci ic e ec s by including dummy a iables o each indi idual o en i y in he eg ession equa ion. The andom
e ec model assumes ha he indi idual-speci ic e ec s a e andom and unco ela ed wi h he independen a iables. I inco po a es
a andom e o e m o accoun o indi idual he e ogenei y. (Guja a i and Po e , 2009).
The Poolabili y, Hausman, and B eusch-Pagan Lag ange Mul iplie (LM) es s play a c ucial ole in guiding he selec ion among
h ee me hods (Pooled OLS, FEM, and REM). The Poolabili y es speci ically de e mines whe he he cons an o a unc ion should
be ea ed as homogeneous o he e ogeneous. I aids in iden i ying he sui able es ima o s, helping decide be ween a pooled
eg ession ollowing he OLS app oach o adop ing FEM. Be o e assessing he alidi y o ixed e ec s (dis inc cons an s o a ious
uni s), he s anda d F- es is u ilized. This es is employed o de e mine he app op ia e me hod be ween FEM and Pooled OLS
me hods. The null hypo hesis posi s ha all cons an s a e he same, while he al e na i e hypo hesis sugges s ha he cons an s
di e . The decision c i e ion dic a es ha i he F- es alue is below he chosen le el o signi icance, he null hypo hesis is ejec ed,
a o ing FEM. Con e sely, i he F- es alue exceeds he signi icance le el, he null hypo hesis is accep ed, indica ing ha Pooled
OLS is mo e app op ia e.
The Hausman es is commonly used o es he null hypo hesis ha he indi idual-speci ic e ec s a e unco ela ed wi h he
independen a iables (Random E ec s Model is app op ia e) agains he al e na i e hypo hesis ha he e is co ela ion (Fixed
E ec s Model is mo e app op ia e). The p ocedu e is o es ima e bo h he Fixed E ec s Model (FEM) and he Random E ec s
Model (REM), calcula e he co a iance ma ix o he di e ence be ween he wo se s o es ima es, and use his co a iance ma ix
o pe o m a Wald es . The es s a is ic ollows a chi-squa ed dis ibu ion. The decision ule is ha i he compu ed p- alue is less
han any chosen signi icance le el (i.e 0.05), he null hypo hesis is ejec ed and concludes ha FEM is mo e app op ia e, and, i
o he wise, his implies ha REM is mo e app op ia e (Guja a i and Po e , 2009).
The B eusch-Pagan Lag ange Mul iplie (LM) es is employed in Random E ec s Models (REM) using he esiduals om O dina y
Leas Squa es (OLS). I s pu pose is o aid in choosing be ween REM and pooled O dina y Leas Squa es (OLS) models. The null
hypo hesis posi s ha he a iance ac oss en i ies is ze o, implying no signi ican di e ences among uni s. The decision c i e ion
in ol es ejec ing he null hypo hesis i he p- alue o he LM es is less han he chosen le el o signi icance, indica ing ha REM
is mo e sui able. Con e sely, i he p- alue is highe , he null hypo hesis is accep ed, a o ing Pooled OLS (Kali a & India, 2013).
Howe e , o allow he obus ness o he model, he Panel-Co ec ed S anda d E o s (PCSE) is employed in he s udy’s analysis.
PCSE accoun s o c oss-sec ional dependence in panel da a which can lead o biased es ima es in he Fixed Random model.
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1071
3. PRESENTATION OF RESULTS
Table 2: Desc ip i e S a is ics
Va iable
Obs
Mean
S d. De .
Min
Max
l inde
792
-1.02815
0.7689547
-2.197243
0.6033209
ins
792
-1.287119
1.44179
-4.127112
1.934323
lgdppc
792
7.152661
0.9521254
5.541656
9.725996
lin
792
2.375399
0.748673
0.8960881
4.636281
In
792
9.834827
30.37339
-8.97474
513.907
Sou ce: Au ho s’ compu a ion, 2024
The desc ip i e s a is ics p o ide an insigh ul o e iew o he key a iables in he s udy. F om he able abo e (Table 2), inancial
de elopmen (l inde ) has an a e age alue o -1.02815 wi h a mode a e s anda d de ia ion, indica ing some a ia ion a ound he
mean and a ange om app oxima ely -2.20 o 0.60. Ins i u ional quali y (ins ) shows a mean o -1.287119 wi h a ela i ely high
s anda d de ia ion o 1.44179, e lec ing signi ican a iabili y ac oss coun ies, wi h alues anging om -4.127112 o 1.934323.
GDP pe capi a (lgdppc) has a mean o 7.152661 and a s anda d de ia ion o 0.9521254, sugges ing mode a e a iabili y and a ange
om 5.541656 o 9.725996. The eal in e es a e (lin ) has a mean o 2.375399 and a s anda d de ia ion o 0.748673, indica ing
consis en a es ac oss coun ies, wi h alues spanning om 0.8960881 o 4.636281. In la ion (in ) p esen s a mean o 9.834827
wi h an excep ionally high s anda d de ia ion o 30.37339, highligh ing subs an ial a iabili y, wi h alues anging om -8.97474
(de la ion) o 513.907 (hype in la ion).
Table 3: Co ela ion Analysis.
Va iable
l inde
Ins
Lgdppc
lin
in
l inde
1
ins
-0.0959
(0.0069)
1
lgdppc
-0.0911
(0.0103)
0.5582
(0.0000)
1
lin
0.0393
(0.2694)
0.0709
(0.0461)
-0.1948
(0.0000)
1
In
0.017
(0.6338)
-0.1722
(0.0000)
-0.0485
(0.1723)
0.1882
(0.0000)
1
Sou ce: Au ho s’ compu a ion, 2024.
The co ela ion esul s in Table 3 e eal no able ela ionships among he a iables. Financial de elopmen (l inde ) has a small bu
s a is ically signi ican nega i e co ela ion wi h ins i u ional quali y (ins ) and GDP pe capi a (lgdppc), indica ing ha as
ins i u ional quali y and GDP pe capi a inc ease, inancial de elopmen sligh ly dec eases. Howe e , hese co ela ions a e weak.
Ins i u ional quali y has a mode a ely s ong posi i e co ela ion wi h GDP pe capi a, indica ing ha coun ies wi h be e
ins i u ional quali y end o ha e highe GDP pe capi a, which is highly signi ican .
The eal in e es a e (lin ) shows a small posi i e co ela ion wi h ins i u ional quali y and a small nega i e co ela ion wi h GDP
pe capi a, sugges ing ha highe eal in e es a es a e sligh ly associa ed wi h be e ins i u ional quali y bu lowe GDP pe capi a.
These co ela ions a e weak, indica ing o he ac o s migh play a mo e signi ican ole in de e mining eal in e es a es. In la ion
(in ) has a weak and insigni ican co ela ion wi h inancial de elopmen and GDP pe capi a, sugges ing no s ong ela ionship wi h
hese a iables. Howe e , i shows a signi ican nega i e co ela ion wi h ins i u ional quali y, indica ing ha be e ins i u ional
quali y is associa ed wi h lowe in la ion a es. Addi ionally, in la ion has a small posi i e co ela ion wi h he eal in e es a e,
sugges ing ha highe in la ion is sligh ly associa ed wi h highe eal in e es a es.
Table 4: Uni Roo Tes Resul s
Va iable
Im-Pesa an-Shin
Decision
Le in-Lin-Chu
Decision
Le el
1s Di e ence
Le el
1s Di e ence
l inde
-8.5671
(0.0000)
I(0)
-15.1251
(0.0000)
I(0)
Ins
-3.5705
(0.0002)
I(0)
-4.6493
(0.0000)
I(0)
lgdppc
0.4034
-13.1725
I(1)
0.2047
-6.7502
I(1)
D . Adeyinka Emmanuel Adeyemi (2025), Global Jou nal o Economic and Finance Resea ch 02(10): 1064-1075
DOI URL:h ps://doi.o g/10.55677/GJEFR/09-2025-Vol02E10 pg. 1072
(0.6567)
(0.0000)
(0.5811)
(0.0000)
lin
2.2570
(0.9880)
-9.0740
(0.0000)
I(1)
-4.0691
(0.0000)
I(0)
In
-5.8175
(0.0000)
I(0)
-38.9384
(0.0000)
I(0)
Sou ce: Au ho s’ compu a ion, 2024.
The Im-Pesa an-Shin (IPS) es esul s in Table 4 indica e ha inancial de elopmen , ins i u ional quali y, and in la ion a e
s a iona y a hei le els, meaning hey do no equi e di e encing. GDP pe capi a and he eal in e es a e a e non-s a iona y a
hei le els bu become s a iona y a e i s di e encing. These esul s sugges ha inancial de elopmen , ins i u ional quali y, and
in la ion can be included in hei o iginal o ms in u he analyses, while GDP pe capi a and he eal in e es a e need o be
di e enced. The Le in-Lin-Chu (LLC) es con i ms hese indings, showing ha inancial de elopmen , ins i u ional quali y, he
eal in e es a e, and in la ion a e s a iona y a hei le els, while GDP pe capi a equi es i s di e encing. This consis ency
ein o ces he eliabili y o he s a iona i y esul s o subsequen analysis.
Table 5: Reg ession Resul s
Va iables
S a ic Model
Panel OLS
FEM
REM
PCSE
Ins
-0.0407*
[-1.70]
(0.090)
-0.116**
[-2.13]
(0.034)
-0.091**
[-1.99]
(0.047)
-0.041***
[-2.67]
(0.008)
Lgdppc
-0.033
[-0.92]
(0.356)
-0.237*
[-1.71]
(0.087)
-0.077
[-0.86]
(0.390)
-0.033
[-1.27]
(0.204)
Lin
0.039
[0.99]
(0.323)
0.191***
[3.31]
(0.001)
0.187***
[3.55]
(0.000)
0.039
[1.08]
(0.281)
In
-0.0001
[-0.140]
(0.887)
0.0004
[0.60]
(0.551)
0.0005
[0.73]
(0.467)
-0.0001
[-0.17]
(0.861)
Cons an
-0.931***
[-2.92]
(0.004)
0.061
[0.06)
(0.954)
-1.045
[-1.46]
(0.146)
-0.931***
[-3.48]
(0.000)
To al Panel Obse a ion
792
792
792
792
R-squa e
0.012
0.012
0.011
0.013
F-s a is ics
3.31***
(0.019)
F-Tes
22.11***
(0.000)
Wald χ2 –s a .
25.48***
(0.000)
10.01**
(0.040)
Hausman Tes
8.02*
(0.0910)
LM Tes
1836.9***
(0.000)
He e oscedas ici y Tes s
36392.6***
(0.000)
C oss-sec ional dependency Tes
3292.1***
(0.000)
Sou ce: Au ho s’ compu a ion, 2024.
The Panel OLS model in Table 5 indica es ha ins i u ional quali y (ins ) has a nega i e and s a is ically signi ican e ec on inancial
de elopmen ( inde ) wi h a coe icien o -0.0407 and a p- alue o 0.090. This sugges s ha a decline in ins i u ional quali y leads
o educed inancial de elopmen . O he a iables such as GDP pe capi a (lgdppc), eal in e es a e (lin ), and in la ion (in ) a e
