Does entrepreneurship matter for financial development during elections? Evidence from the African context

This study examines the moderating effect of elections on the relationship between entrepreneurship and financial development using the dynamic system GMM for a dataset of 42 African economies over the period 2004–2022. First, the study examines the independent effects of entrepreneurship and elections on financial development. Second, it examines the mediating effect of entrepreneurship on the election-finance nexus by regressing elections on entrepreneurship. The study establishes that elections reduce entrepreneurship and, consequently, reduce financial development. It also shows a positive entrepreneurship-finance nexus, indicating that countries that open their economy for entrepreneurship can increase the level of financial development. Moreover, we provide evidence to affirm that the positive effect of entrepreneurship on financial development is amplified during election years. Therefore, policymakers can harness the political energy, entrepreneurial activities, and public engagement typical of elections to drive deeper and accelerate the pace of entrepreneurship and financial development during elections. The originality of this study lies in its novel exploration of whether election cycles influence the relationship between entrepreneurship and financial development, a dynamic that has received limited attention in existing literature, particularly within the African context.