Stock Market Listing and Firm Performance in Mozambique: Exploring the Incentive Gap in a Bank-dominated Economy

This paper examines the relationship between stock market listing and firm performance, considering whether this association helps to explain the limited participation of firms in Mozambique’s stock exchange, the Bolsa de Valores de Moçambique (BVM). Prior studies reveal mixed outcomes. We employed the Related-Sample Wilcoxon Signed Rank Test to compare the median pre-and post-listing ROA of the listed firms. Also, using panel data for Mozambican firms, we estimate hybrid random effects and two step system GMM models to address endogeneity and reverse causality. Results show a consistently statistically nonsignificant relationship between listing status and our measures of performance (ROA and ROE), both within and between firm levels. Moreover, listing does not significantly reduce agency costs, and its effect on leverage is negative at the between-firm level, suggesting listed firms carry lower debt than expected. Control variables, particularly leverage and agency costs, exhibit significant negative effects on firm performance, underscoring financial fragility and governance challenges. Overall, findings indicate that listing on the BVM does not enhance firm performance, helping explain firms’ reluctance to list. These results highlight the institutional voids in Mozambique’s capital market and suggest that without stronger infrastructure, investor protection, and governance reforms, listing will remain unattractive to most firms.