Causality between FDI and Financial Market Development: Evidence from Emerging Markets

This article aims to investigate the relationship between stock liquidity and dividend across emerging market countries as well as examined the moderating role of financial market development on the relationship between stock liquidity and dividend. Data were obtained from the World Bank and DataStream databases. The study examined 3,258 listed firms from 22 emerging markets to be extrapolated in the emerging market context. To analyse the data, this article used the panel data Tobit model and panel logistic regression, both with random effects. The analysis revealed that financial market development has a positive moderating effect on the relationship between stock liquidity and dividend by improving local market liquidity and mitigating information asymmetry. The study findings provide information for managers to devise investment strategy in the emerging markets. This article provides new insights into the financial market development moderating role on the relationship between stock liquidity and dividend.

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Financial Market Development and Income Distribution Inequality in the Emerging Markets

Asian Business Research ◽

10.20849/abr.v4i3.653 ◽

2019 ◽

Vol 4 (3) ◽

pp. 6

Author(s):

Dingli Xi

Keyword(s):

Income Distribution ◽

Emerging Markets ◽

Financial Market ◽

Time Series Data ◽

Panel Data Analysis ◽

Developed Countries ◽

Market Development ◽

Series Data ◽

Financial Market Development ◽

The Relationship

The disruptive effects of the subprime financial crisis have raised new global concerns toward the increasing income distribution inequality. Nowadays, it has become one of the mainstays of public and scientific discourse around the world. Theoretical financial Kuznets curve suggests that the relationship between financial market development and income distribution inequality follows an inverted U-shaped pattern. However, current literature failed to support this hypothesis. The expansion of the financial market truly provides more relative opportunities for the poor which benefits the equalization. But those advantage opportunities are likely to be captured by some specific groups instead of all population. The majority literature on this academic field focus on developed countries with cross-sectional and panel data analysis that providing controversial results. They emphasize the financial development as a consequence of economic growth without deep analysis of the financial market development as an independent entity in determining the inequality. This study proposes to use a more comprehensive and rigorous method to identify the direct relationship between financial market development and income distribution inequality in 10 most typical emerging markets. Both short-run and long-run impacts of financial market development on income distribution inequality are examined and defined by utilizing time-series data and error-correction modelling technique. By providing a better understanding of the relationship, the findings of the research would make contributions to financial market policy adjustments in developing countries.

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