Thesis submitted for the degree of Doctor of Philosophy in Finance
at the University of Hull
This thesis consists of three essays that address the question, whether the dynamics of investing
in the developed markets are applicable in the Sub-Saharan African (SSA) frontier markets
following the emerging market’s experience. The first essay (chapter 3) explores the existence of
herding behaviour among investors in a sample of 10 frontier markets. The study employs the
cross-sectional absolute deviation (CSAD) test for detecting presence of herding behaviour. The
findings reveal the presence of herd formation during the period under study in all markets.
Furthermore, the evidence shows a non-existence of herding during periods of extreme market
conditions. Moreover, the South African market does not seem to motivate herding in other
African markets.
The second essay examines the impact of corporate governance practices of the East African
Community (EAC) listed companies on performance. The present study employs the fixed-effects
(FE) and the random-effects (RE) – two-stage least square – instrumental variable (RE-2SLS-IV)
regression models to analyse data from a sample of 47 firms. The empirical investigation shows
that the size of the board has a positive impact on market values but a negative effect on operating
performance. The essay also documents that the largest investors, most of whom are strategic
investors too, have an adverse effect on market values, whereas they have little or no effect on
improving operating performance. The result also suggests foreigners and civil servants (or
politicians) board members to impact positively on operating performance.
The third study is an examination of the influence of psychological factors on retail investors’
trading behaviour at the Dar es Salaam Stock Exchange (DSE). The study employed a survey
approach. The main finding is that retail investors in the market are prone to several behavioural
biases. Perceived trading knowledge and perceived experience, for example, affect both the trading
frequency and portfolio diversification. The tendency to focus on attention grabbing stocks
explains why retail investors at the DSE prefer domestic over foreign stocks and the extent of
diversifying their portfolios. The tendency to exhibit the disposition effect is mainly explained by
gender, extrapolation of past performance, and perceived competence.