Challenges and Opportunities to Launch Ethiopia’s Stock Market

Abstract

The purpose of the study was to identify the challenges and prospects that exist to launch Ethiopia’s stock market. The study used mainly a quantitative research approach and data was collected from both primary and secondary sources. A qualitative research approach was also used in the research to enhance the quantitative data. Primary data was collected through questionnaires and secondary data was collected from various credible sources. Convenience sampling was also used. A total of 123 responses from two different target populations were used. This research employed a descriptive research design. To analyze quantitative data descriptive statistics such as percentages, frequencies, mean and standard deviation were employed. The result of the study showed that unreliable accounting disclosures, scarcity of stock market-experienced professional fund managers, financial knowledge of potential investors, the high exchange rate of the birr against the dollar, and high inflation rate currently are among the challenges of launching a stock market in Ethiopia. The key findings of the study also revealed that the flourishing banking and financial sector are investment alternatives for the stock market, the readiness of accountants to participate in the stock market, the relative high rank of Ethiopia’s GDP size and its growth, the new stock market regulations, and the potential Ethiopia’s pension fund brings to the stock market as an investment base are the main opportunities that exist in Ethiopia to launch the stock market. The research concluded that the potential opportunities identified are vast and has put forward recommendations to reduce the expected challenges. Therefore, the researcher recommends the responsible bodies address the findings of the research to launch a successful stock market.