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1.1 Background of the Study
The effect of information and communication technology (ICT) on the operation of stock markets has been a subject of debate in recent times. A school of thought led by authors like Shiller (1989),Summers (1988), Porteba and Summers (1988) would argue that stock markets have become excessively volatile since the adoption of computer assisted trading strategies as the latter increase short-term price volatility and risks. They also argue that very few investors have access to online trading systems. Few actually own computers and have easy access to the Central Securities Clearing System. Many investor, they claimed, do not have access to a system that sends orders to stockbrokers for automated execution.
They also contend that ICT driven stock market operations are fraught with fraud and manipulation, which mostly affect individual investors. A case in point relates to the sale of shares without authorization of the stockholders, a practice that is given impetus by greed and dishonesty of some market participants.
They further argued that surveillance problems and the lack of proper enforcement of penalties by the legal system make the adoption of a fast-paced ICT system dangerous to investors.
The second school of thought, which includes authors Fama and French (1988), on the other hand, argued that information technology have made stock markets more efficient as attendant stock prices now reflect important information and investors perception of stocks more swiftly. In their contention, ICT has made the capital market more efficient by providing all participants with faster and more effective means of exchanging information. They maintained that new products and instruments have been made readily available as a result of the advent of sophisticated ICT. Evidently, stock markets can be more resilient, possess greater depth and breadth with the intervention of ICT.
It must be observed that the premises of the above theorizing are capital markets in developed countries. Would their arguments hold true for the less Developed Countries (LDC)? Which school of thought would appropriately explain the experiences of the LDCs? Perhaps the critical questions that need to be addressed would include: Has the adoption of information technology had a positive or negative impact on the operation of Nigerian stock exchange? Has ICT transformed the way business is conducted on the Exchange? Has ICT benefited the Nigeria investor? The plethora of research questions can go on and on. However, this paper seeks to ascertain how the adoption of information technology has impacted on stock market operation indicators and the way business is conducted on the Nigerian Stock Exchange. A possible area of future research would relate to the benefits of ICT adoption by the stock market to the Nigeria (individual) investor, which is not covered in previous studies.
1.2 Statement of Problem
Information and Communication technology has made a tremendous impact on the Nigerian Stock Exchange in recent time. This has increased investors confidence due to the speed and accuracy at which information is disseminated to stakeholders.
But inspite of this laudable impact of ICT in the operation of Nigeria Stock Exchange, individual in Nigeria do not still have access to stock market trading online other than by going through the brokerage station, as against global trend where investors in other part of the world browse the internet and go for stock market information available on the webpage in order to have an instant informed decision about investment i.e., either to buy or sell the share of a particular firm. These gap dramatically nudged up the overall volume and volatility of stock market in recent time. As such doubt is expressed to a large extent about the extent of usage of information and communication technology in the Nigerian Stock Exchange with particular reference to automated trading system (ATS).
It is against this background that the subject matter of this research is seen as an empirical problem worthy of investigation.
1.3 Research Question
In order to evaluate the impact of ICT in the operation of Nigeria Stock Exchange, the following research questions were generated:
i. Has the adoption of information technology had a positive or negative impact on the operational performance of stock brokers Nigerian stock exchange?
ii. How does ICT affect service delivery in Nigerian Stock Exchange?
iii. Has ICT transformed the way business is conducted in Nigeria stock Exchange?
1.4 Objectives of the Study
The main objective of the study is to assess the impact of information and communication in the operation of Nigeria Stock Exchange. The specific objectives are to:
i) Examine whether the adoption of information technology had a positive or negative impact on the operational performance of stock brokers in Nigerian stock exchange.
ii) Evaluate the extent of service delivery in relation to the use of ICT in Nigerian Stock Exchange.
iii) Find out whether ICT has transformed the way business is conducted on the Nigerian Stock Exchange.
1.5 Statement of Hypothesis
The following hypotheses were formulated for the study:
1. H1: ICT does not enhance the Operational performance of stock Brokers in Nigeria stock exchange.
H2: ICT enhances the Operational performance stock brokers in Nigeria stock.
2. H1: ICT does not significantly enhance efficient service delivery in Nigeria stock exchange.
H2: ICT significantly enhance efficient service delivery in Nigeria stock exchange.
3. H1: There is no significant relationship between ICT and the way business is conducted in Nigerian Stock exchange.
H2: There is a significant relationship between ICT and the way business is conducted in Nigerian Stock exchange.
1.6 Scope of the Study
The study covers an empirical investigation on the impact of ICT on the operations of the Nigeria Stock Exchange. The study cover the identification of the extent of usage of ICT in the Nigeria Stock Exchange as well as the examination of Automated Trading System (ATS). The period of the study covers a time from 2002 to 2012.
1.7 Significance of the Study
The study will be beneficial to individual, corporate organization and students especially as they may utilize its findings in their different endeavors:
To the individual, the research will unveil the benefit that could be derived from utilizing the automated trading system to direct transactions.
To the general public, it will enhance deep understanding of the electronic operations of the Nigerian stock exchange via information and communication.
To students and scholars the study will equally add to the existing knowledge on the impact of ICT on the operations of Nigeria stock exchange. The study will also be a springboard to undertake further studies on the subject matter.
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