Determinants of capital market performance in Uganda : a case of Uganda Securities Exchange (USE)

Abstract

The study established the determinants of capital market performance in Uganda. Capital market performance increases mobilization of savings and channel them into productive investments for the economic growth and development. Capital Market Theory supports capital markets performance. The study was guided by two research objectives; to examine the determinants of capital market performance in Uganda and to design strategies to improve capital market performance in Uganda. The study used a qualitative research design and the unit of analysis was Uganda Securities Exchange (USE). The unit of inquiry were players at the USE. Primary data was collected from 38 participants using the interview guide and analyzed with ATLAS.ti: Version 20 Qualitative Data Analysis. Results revealed that capital market performance is determined by internal factors including: market price of securities which varies every second on the stock market, earning per share, information flow on securities which fully reflect variation in share price to influence the market decision on whether buy or sell and setting of securities chart target to make investment decision; and external factors include regulatory and legal framework, exchange rate trend, inflation rate, interest rate, Gross Domestic Products (GDP), competence of market players, investors’ income and fiscal policy. The macro–economic factors were growth of GDP, favorable exchange rate, daily data that fully reflect price, distributed ledger technology for securities and high market capitalization determine the investors’ opportunities to invest in the securities on capital market; institution factors were strong and clear regulatory framework, adoption of international accounting and audit standards, removal of barriers on securities exchange, developing capital market infrastructure, market liquidity to invest in securities and high expected returns determine investor’s decision to buy or sell shares; and market factors were market price of securities, random walk test to set the chart, skilled market players, economic stability, participation of local institutions and increased dividend per share. The strategies to improve capital market performance include disclosure of financial information, strong legal and institutional framework, market intermediation services, expansion of investors’ base, versatile market infrastructure and an efficient market that full reflect share price on stock exchange. The study recommends strengthening the legal and institutional framework, developing investors’ trust through building a market infrastructure with instant information disclosures that fully reflect securities value every second /minute.