Effect of Institutional Quality on Firm Entry in Nigeria: An ARDL Approach

Abstract

This study examines the effect of institutional quality on firm entry in Nigeria for the period of 1986-2015 using ARDL bound test approach to cointegration. Bound test shows that the variables such as firm entry, institutional quality, financial capitals, unemployment and economic condition are cointegrated. The study confirms that in the short run, institutional quality has significant and negative effect on new firm creation while the long run coefficient shows that there is positive and significant effect of institutional quality on new firm entry. By implications, the result shows the importance of institutional quality in creating new firms in Nigerian environment. Therefore, top priority needs to be given to the regulatory environment by reducing barriers to entry and improves overall institutional quality in Nigeria.