FINANCIAL DEVELOPMENT AND BUSINESS GROWTH IN SOUTH AFRICA: A MODERATED ANALYSIS OF REGULATORY QUALITY

South Africa’s economic environment continues to battle with uneven business growth, exacerbated by weak financial linkages and inconsistent regulatory performance. This study examines the effect of stock market capitalization on business growth, while assessing the moderating role of regulatory quality. Anchored on the Endogenous Growth and Institutional Theories, the study adopts a quantitative design using secondary data from 2015 to 2024. Annual time series data for stock market capitalization, regulatory quality, and business growth (measured by GDP per capita growth rate) were analyzed using multiple regression models in Stata 26. Two models were estimated: Model 1 tested the direct effects of stock market capitalization and regulatory quality, while Model 2 included their interaction to evaluate moderation. The findings from Model 1 reveal that stock market capitalization (? = 0.038, p = 0.017) and regulatory quality (? = 1.12, p = 0.003) have significant positive effects on business growth. In Model 2, the interaction term (? = 0.042, p = 0.016) confirms that regulatory quality significantly strengthens the effect of stock market capitalization on business growth. The study concludes that enhancing both financial market depth and regulatory frameworks is crucial for achieving sustained economic progress. It recommends strengthening capital market access, institutional regulatory reforms, and harmonization of financial governance strategies.