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1. Introduction
Capital markets around the world are expected to serve primarily as media for raising long-term industrial finance, provide means for allocating a nation’s real and financial resources efficiently among alternative, competing and sometimes conflicting requirements and provide liquidity for investment funds from the standpoint of individuals in the economy. Moreover, a strong and viable capital market reposes some measure of confidence in an economy and serves to some extent as a barometer for measuring economic performance. Through the pricing mechanism of a capital market, top management is provided with some current idea about cost of capital necessary for investment appraisal. A capital market also provides a medium for broadening ownership base for investments (Ojo, 2010).
The development of stock markets in nearly all the African countries with emerging markets has been induced and fostered by the respective governments. This is in the belief that these markets would, by serving as a source of industrial finance, greatly assist in fostering their economic and industrial development. However, their expectation in this regard has not been fulfilled to a large extent. The role of a stock market in any developing economy goes beyond the need to increase the total volume of investible funds. This is because other financial institutions in an economy can be reformed to achieve this goal. To accelerate the pace of economic development in Nigeria, the Barback Committee was set up “to advise on ways and means of fostering a share market”. According to Ojo (2010), the establishment of a stock market would not have been recommended for Nigeria if the Barback Committee’s terms of reference had included a cost–benefit analysis of such a venture. This view is premised on the poor performance of the Nigerian stock market as echoed by several other scholars including Onosode (1990) and Soyode (1991).
It has become increasingly commonplace knowledge that virtually every facet of the economies in Nigeria and some other African Countries has become enmeshed in financial malpractices. It is equally not in doubt that fraud, financial malpractices and financial mismanagement have become a routine practice in these countries, which adversely affect their development. The financial sector in an economy is critical in mobilizing financial resources for economic development. Unfortunately, the global financial crisis which...