Open Access Open Access  Restricted Access Subscription or Fee Access


Dr. David W. Wanyama


Purpose: The purpose of this study was to analyze how stock market development influences the growth of corporate bond market in Kenya.

Methodology: The study used descriptive and causal research designs.  Secondary data was used. The sample of the study consisted of daily and monthly time series covering six years beginning January 2009 to December 2014. Unit root tests using Augmented Dickey-Fuller (ADF) and Phillips-Perron tests were done. The study used Eviews econometric software to facilitate empirical analysis of data.

Results: Regression of coefficients results shows that Stock market size and corporate bonds are positively and significant related (r=0.029, p=0.002), stock market liquidity and corporate bonds are positively and significant related (r=8.291, p=0.0008), Stock Market Concentration and corporate bonds are positively and significant related (r=0.014, p=0.017). Regression of coefficients results shows that Stock Market Volatility and corporate bonds are positively and significant related (r=0.000023, p=0.0001).

Unique Contribution to Theory, Practice and Policy: This study recommends study recommends for Policy makers to come up with measures to enhance the liquidity of the stock market which will in turn encourage investment in corporate bonds. The study recommends that concerted efforts should be made to improve market concentration in the corporate bonds market so that it can operate optimally. Policy makers should be aware of and monitor the level of stock market volatility that is appropriate for promoting the growth of the corporate bond markets and indeed other financial markets. Policy makers in Kenya should find ways and means of increasing the size of the stock market to reap the aforementioned benefits.

This Abstract was viewed 85 times | PDF Article downloaded 106 times


Stock market size, Stock market liquidity, Stock Market Concentration, Stock Market Volatility, growth, corporate bond market

Full Text:



Adelegan, O. J. (2009). The derivatives market in South Africa: Lessons for Sub- Saharan African Countries. IMF Working Paper, 09/196.

Aduda, J., Masila, J. M., and Onsongo, E. N. (2012). The determinants of stock market development: The case for the Nairobi Stock. International Journal of Humanities and Social Science, 2(9), 214-227.

Arestis, P., Demetriades, P.O., Luintel, K. B. (2001). Financial development and economic growth: The role of stock markets. Journal of Money, Credit and Banking, 33(2), 16-47. Available at http://www. iosco. org/research/pdf/swp/SW4-Corporate- Bond-Markets.

Bitok, S. K., Tenai, J. B., Chenuos, J. K. and Kosgei, N. (2014). Factors influencing the development of capital markets in a developing economy: A case study of Nairobi Securities Exchange in Kenya. European Journal of Business and Management. 6(16), 52-60.

Boyd, J.H. and De Nicol´o, G. (2005). The theory of bank risk taking and competition revisited. The Journal of Finance, 60(3), 1329-1343.

Braun, M., and Briones, I. (2006).The development of bond markets around the World. Draft version2.0, February 2006.

Chordia, T., Sarkar, A. and Subrahmanyam, A (2003). An empirical analysis of stock and bond market liquidity. Federal Reserve Bank of New York Staff Reports, 164.

Demirguc-Kunt, Asli, and Ross Levine, (2006a). Stock markets, corporate finance and economic growth: An overview. The World Bank Economic Review, 10 (2).

El-Wassal, K. A. (2013). The development of stock markets: In search of a theory, International Journal of Economics and Financial Issues. 3 (3).

Greenwood, R., Hanson, S. and Stein, J. C. (2010). A gap-filling theory of corporate debt maturity choice. The Journal of Finance. 65(3), 993-1028.

Herring, R. and Chatusripitak, N. (2001). The Case of the missing market: the bond market and why it matters for financial development. Wharton Financial Institutions Centre Working Paper, University of Pennsylvania.

Ikikii, S. M. and Nzomoi, J. N. (2013). An analysis of the effects of stock market development on economic growth in Kenya. International Journal of Economics and Finance. 5(11), 145 – 151.

J.P. Morgan. 2006. Introducing the JPMorgan Government Bond Index-Emerging Markets (GBI-EM): Index Methodology. J.P. Morgan Emerging Markets Research and Bond Index Research, January.

Jorion, P. (2006). Value at Risk: The new benchmark for managing financial risk,3rd Ed., McGraw-Hill, New York.

Kahn, B. (2005). Original sin and bond market development in Sub-saharan Africa. In: Africa in the World Economy: The National, Regional and International Challenges, 67-87.

Kamau, A. and Were, M. (2013). What drives banking sector performance? Global Business and Economics Research Journal. 2(4):45-59.

Kapingura, F. and Ikhide, S. (2015). Macroeconomic determinants of liquidity of the bond market in Africa: Case study of South Africa. Journal of Economics and Behavioural Studies. 7(3), 88-103.

Kemboi, J. K. and Tarus, D. N. (2012). Macroeconomic determinants of stock market development in emerging markets: Evidence from Kenya. Research Journal of Finance and Accounting, 3(5).

Levinger, H. and Li, C. (2014). What is behind recent trends in Asian corporate bond markets? Current Issues, Deutsche Bank Research, Germany.

Markowitz, H.M.(1991).Portfolio selection: Efficient diversification of investments,2nd Ed., Basil Blackwell, Cambridge MA & Oxford, UK.

Mu, Y., Phelps, P. and Stotsky, J. G. (2013). Bond markets in Africa. IMF Working Paper. WP/13/12.

Nyasha, S. and Odhiambo, N. M. (2014). The dynamics of stock market development in Kenya. Journal of Applied Business Research. 30(1), 73 – 82.

Oji, C. K. (2015). Bonds: A viable alternative for financing Africa’s development. Occasional Paper 211. South African Institute of International Affairs.

Patoda, R. and Jain, K. (2012). Assimilation between bond market and stock market. Global Journal of Management and Business Research. 12(20), 43-54.

Plummer, M. G. and Click, R. (2003). Bond market development and integration in ASEAN. Working Paper Series 2003-07. The International Centre for the Study of East Asian Development, Kitakyushu.

Putunoi, G. K. and Mutuku, C. M. (2012). Domestic debt and economic growth nexus in Kenya. Current Research Journal of Economic Theory. 5(1), 1-10.

Raghavan, S. and Sarwono, D. (2012). Corporate bond market in India: Lessons from abroad and road ahead. International Journal of Trade, Economics and Finance, 3(2), 120-125.

Sengupta, R. and Anand, V. (2014). Corporate debt market in India: Lessons from the South African experience. Working Paper, WP-2014-029, Indira Gandhi Institute of Development Research, Mumbai.

Tendulkar, R. (2015). Corporate bond markets: An emerging markets perspective. Staff Working Paper SWP6/2015, IOSCO Research Department. IOSCO.


  • There are currently no refbacks.

Paper submission email:

This journal follows ISO 9001 management standard and licensed under a Creative Commons Attribution 3.0 License.

Copyright ©