Financial literacy, financial inclusion and participation of individual on the Ghana stock market

Abstract

This paper examines the impact of financial literacy and financial inclusion on stock market participation in Ghana. It employs a sample of 1,966 respondents across the 10 regions of Ghana for the year 2018. We employ biprobit models to estimate the influence of financial literacy on financial inclusion, while robust probit models are used to independently analyse the effect of financial literacy and financial inclusion on stock market participation as well as their joint effect. We find the following results: first, financial literacy positively influences financial inclusion. Second, the study does not support previous findings that financial literacy is not a determinant of stock market participation in Ghana. Third, financial inclusion through using an account to save significantly affects stock market participation. Finally, the interaction of financial literacy and financial inclusion on stock market participation provides evidence of no significant effect.

Keywords:

• Financial literacy
• financial inclusion
• stock market
• developing country

JEL Classification:

• D14; D21; C36

Public interest statement

Our study analyses the impact of financial literacy and financial inclusion on individual participation on the Ghanaian stock market. We sample 1,966 households across the 10 regions of Ghana for the year, 2018. We find the following results: ▪ first, those who have some knowledge in finance are normally financially included; ▪ Second, the study does not agree with the previous findings that financial literacy is not a determinant of stock market participation in Ghana. ▪ Third, financial inclusion through the usage of an account to save significantly affects household to buy or sell their investment at Ghana Stock Exchange. ▪ Finally, we find that household who are knowledgeable in finance and also financially included do not participate on the stock market activities

Acknowldgement

Mohammed Amidu and Joshua Y. Abor would like to thank the DFID-ESRC for funding this research which is part of DFID-ESRC Research Project Ref ES/NO13344/1: “Delivering Inclusive Financial Development & Growth”.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Our results also suggest that Ghanaian women are likely to save than the men.

Additional information

Funding

This work was supported by the Department for International Development, UK Government [Ref ES/NO13344/1:]; Department for International Development, UK Government [Ref ES/NO13344/1:].

Notes on contributors

Agnes Akpene Akakpo

Agnes Akpene Akakpo is a young researcher with an MPhil degree in Accounting from University of Ghana. She has been researching and serving as a Research and Teaching Assistant of University of Ghana Business School. Her area of research includes: challenges of small and Medium Businesses (SME’s), corporate governance, information quality and disclosure as well as financial literacy and financial markets. She is also interested in how financial reporting impact social and economic policies in a country, especially in the public sector. Agnes is also a Chartered Accountant.