The Impact of Covid-19 Pandemic on Market Liquidity: Evidence from African Countries

Abstract

Purpose: This study analyzed impact of COVID-19 on market liquidity. Specifically, the study examines the causal relationship that existed between daily growth of reported cases and market liquidity in selected African countries. Methodology: The study used quantitative approach and panel design from African Stock Markets. It also employed the use of AMIHUD liquidity ratio to measure market depth of Liquidity. Findings: The findings indicate mixed results that daily growth of reported cases impacted negatively the market liquidity for Egypt, Nigeria and Zimbabwe. Contrary, the daily reported cases had a positive impact on the market liquidity in Morocco. The reported cases of COVID-19 had no significant impact on the market liquidity for Botswana, Ghana, Tunisia, Zambia, Uganda and Kenya. Additionally, the number of reported deaths had a negative influence on market liquidity in Morocco. It is recommended that Governments should provide transparent and timely information about the state of the pandemic and its impact on the economy, and promote remote work to limit the spread of communicable diseases and minimize their impact on market liquidity and the economy at large. Originality/Value: This study is meant to raise public awareness on how COVID19 pandemic has impacted the liquidity of capital markets. It is trusted that the suggested recommendations will enable the regulatory authorities to react timely and in a more transparent way in case of pandemic occurance, hence reduce their impacts on performance of capital markets.