Predictors of Investors’ Participation in the Egyptian Stock Market: Application of Theory of Planned Behavior

Abstract

Despite the opportunities of growth for the Egyptian stock market, it still offers limited potential to attract investors. This paper explores how various factors related to attitudes, subjective norms and perceived behaviour control as indicted by the theory of planned behaviour affect stock market participation (SMP) in the emerging market of Egypt. The aim of this paper is to study how the influence of factors as financial literacy, risk, influence of others, confidence in the regulator among others, affect consumers’ investment decision to participate in the stock market. A pilot study when combined with literature review revealed eight factors that might affect the investors’ intention and behaviour in the Egyptian stock market. The study then apply TPB to develop a comprehensive model to include the most important factors that may have a strong potential to enhance the equity holding behaviour and explain SMP in the emerging market of Egypt; a market with a lot of potential but rarely studied. This model can be further tested across different developing markets as well. The study concluded that investment intention could predict the actual investment in the stock market (which represents behaviour). Nevertheless, the behaviour is not determined by only those factors tested. Other moderating factors (as change in interest rates, taxes, transaction costs…) can be examined to test the effect on SMP, which opens the room for future research.