Stock Market Development, Banks and Firms Growth: Empirical Evidence from Saudi Arabia

Najeb Masoud, Glenn Hardaker


This study provides new and updated empirical investigate the effect of stock market development, banks development and firms growth using Saudi Arabia industrial firm-level data set for the period (1995–2013) and applying GMM, MG techniques technique model developed for dynamic panels. The econometric results reveal that with more development in the stock market firms that use equity finance heavily grow faster than firms that do not. These findings provide firm-level support for the proposition that the development of the stock market facilitates economic growth in Saudi Arabia. Our results also show that both the stock market and the banking sector development are significant in facilitating the firm’s growth in Saudi Arabia. In particular, we find that measures of both market and banking development independently predict firm’s growth when entered together in firm growth regressions. The results are consistent with the hypothesis that the stock market and the banking sector development have different effects on small and large firms.

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)  Email:

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