scholarly journals Stock market liberalization: implications on cost of capital in emerging Islamic countries

2019 ◽  
Vol 3 (2) ◽  
pp. 157-178
Author(s):  
Bilal İlhan
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Cost Of Capital ◽  
Market Development ◽  
Stock Exchanges ◽  
Market Liberalization ◽  
Content Type ◽  
Stock Market Development ◽  
Stock Market Liberalization ◽  
Islamic Countries

Purpose Most of the major Islamic countries’ stock exchanges have not been able to perform at the same pace with the major emerging countries’ stock exchanges since the mid of 1990s. The purpose of this paper is to examine the implications of stock market liberalization on cost of capital as one of the crucial driver to stock market development and physical investment growth in emerging Islamic countries. Design/methodology/approach This study employs static panel data techniques on the sample of seven emerging Islamic countries over the years 1989-2008. Findings The findings of this study suggest that stock market liberalization significantly reduces cost of capital in the stock markets of sample Islamic countries, which carries policy-oriented implications. Reduction in the cost of capital increases the number of exchange-traded companies, profitability of projects and aggregate investment level; therefore, the study findings are highly concerned by the economic policymakers, corporations and investors alike. Research limitations/implications In the literature, different proxies are employed to measure stock market liberalization and cost of capital as well. Due to data limitations, this study could not employ different proxies for both, especially for stock market liberalization, for robustness purpose. That limitation further restricted the coverage of Islamic stock markets and time period. Therefore, generalization of the study results for overall Islamic stock markets can be slightly drawn. Originality/value The paper provides further understanding regarding the effects of SML on cost of capital, thereby indirectly on the stock market development, in the context of EIC.

Market liberalizations and efficiency in Latin America

2016 ◽  
Vol 33 (4) ◽  
pp. 553-575 ◽  
Author(s):  
Sheung Chi Chow ◽  
Yongchang Hui ◽  
João Paulo Vieito ◽  
ZhenZhen Zhu
Keyword(s):  
Latin America ◽  
Stock Market ◽  
Latin American ◽  
Stock Markets ◽  
Hypothesis Test ◽  
Ratio Test ◽  
Market Liberalization ◽  
Content Type ◽  
Stock Market Liberalization ◽  
The Impact

Purpose This paper aims to examine the impact of stock market liberalization on efficiency of the stock markets in Latin America. Design/methodology/approach Daily stock indices from Latin American countries, including Brazil, Mexico, Chile, Peru, Jamaica and Trinidad and Tobago, are used in the analysis. To examine the impact of stock market liberalization on efficiency, the authors use several approaches, including the runs test, Chow–Denning multiple variation ratio test, Wright variance ratio test, the martingale hypothesis test and the stochastic dominance (SD) test, on the above Latin American stock market indices. Findings The authors find that stock market liberalization does not improve stock market efficiency in Latin America. Originality/value This investigation is among the first to examine the impact of stock market liberalization on the efficiency of the stock markets. It is among the first to examine the impact of stock market liberalization on the efficiency of the Latin American stock markets. It is also among the first to apply the martingale hypothesis test and a SD approach on issue about efficient market.

Do stock market and banking sectors development promote innovation efficiency?

2018 ◽  
Vol 14 (5) ◽  
pp. 506-521
Author(s):  
Soo-Wah Low ◽  
Ali Albada ◽  
Nurhatiah Ahmad Chukari ◽  
Noor Azlan Ghazali
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
World Intellectual Property Organization ◽  
Market Development ◽  
Content Type ◽  
Stock Market Development ◽  
Innovation Output ◽  
Developed Stock Markets

Purpose The purpose of this paper is to investigate the impacts of stock market and banking sectors development on a country’s efficiency in transforming its innovation input into output. Design/methodology/approach This study employs a generalized method-of-moments panel estimator to examine the role of stock market and banking development in influencing innovation efficiency. Findings Findings show that a country’s stock market development is positively related to its innovation efficiency ratio. Countries with more developed stock markets have relatively higher efficiency in transforming innovation input into innovation output than those with less developed stock markets. There is no evidence that innovation efficiency is influenced by banking sector development. However, when stock market and banking sectors are modeled together, while stock market development retains its positive influence, the findings indicate that banking sector exerts negative impact on innovation efficiency. Practical implications The findings provide useful insights to guide policy decisions for a country’s innovation agenda in enhancing its innovation performance. The findings imply that stock market development should be embraced as one of the key policy areas in order for a country to be more efficient in transforming its innovation input into innovation output. Originality/value This paper provides first evidence using data sourced from Global Innovation Index report, first available in 2007 and published by Cornell University, INSEAD and the World Intellectual Property Organization.

Stock market development and income inequality

2017 ◽  
Vol 44 (1) ◽  
pp. 87-98 ◽  
Author(s):  
Athanasios Tsagkanos
Keyword(s):  
Income Inequality ◽  
Stock Market ◽  
Low Income ◽  
Negative Relationship ◽  
Market Development ◽  
Rate System ◽  
Content Type ◽  
Stock Market Development ◽  
Tax Rate ◽  
Indirect Relationship

Purpose The purpose of this paper, in contrast to other studies, is to examine an indirect relationship in terms of the effect of income inequality with stock market development in countries South of the Euro-zone during the period 2002-2013. Design/methodology/approach The author adopts a new econometric method, the Improved Augmented Regression Method, to obtain bias-reduced and stationary-corrected estimators. Findings The results reveal a negative relationship that puts into doubt the recovery of growth. Originality/value The new econometric methodology leads to a novel suggested policy on the need for reforms adopting a low-income tax rate system and reinforcement of export-oriented productivity. This conclusion is strengthened by the respective relationship in USA.

scholarly journals The macroeconomic drivers of stock market development: evidence from Hong Kong

2019 ◽  
Vol 12 (2) ◽  
pp. 185-207 ◽  
Author(s):  
Sin-Yu Ho ◽  
Nicholas M. Odhiambo
Keyword(s):  
Hong Kong ◽  
Stock Market ◽  
Inflation Rate ◽  
Banking Sector ◽  
Trade Openness ◽  
Market Development ◽  
Content Type ◽  
Stock Market Development ◽  
Banking Sector Development ◽  
Short Run

Purpose The purpose of this paper is to examine the macroeconomic drivers of stock market development in Hong Kong during the period 1992Q4-2016Q3. Specifically, it investigates the impact of banking sector development, economic growth, inflation rate, exchange rate, trade openness and stock market liquidity on stock market development. Design/methodology/approach This paper uses quarterly time-series data covering the period 1992Q4-2016Q3, which have been obtained from various reliable sources. The study uses the autoregressive distributed lag bounds testing procedure to identify both the long- and short-run macroeconomic drivers of stock market development in Hong Kong. Findings We find that banking sector development and economic growth have positive impacts on stock market development, whereas the inflation rate and the exchange rate have negative impacts on stock market development both in the long and short run. In addition, the results show that trade openness has a positive long-run impact but a negative short-run impact on stock market development. Originality/value Despite the phenomenal growth of stock market in Hong Kong, there are, to the best of the authors’ knowledge, no relevant studies on the macroeconomic drivers of stock market development in Hong Kong. Therefore, this paper endeavours to enrich the literature by examining the macroeconomic drivers of stock market development in Hong Kong during the period 1992Q4-2016Q3.

scholarly journals Financial development, openness in financial services trade and economic growth

2019 ◽  
Vol 3 (2) ◽  
pp. 42-65 ◽  
Author(s):  
Rabia Khatun ◽  
Jagadish Prasad Bist
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Financial Development ◽  
Financial Services ◽  
Banking Sector ◽  
Market Development ◽  
Services Trade ◽  
Content Type ◽  
Stock Market Development ◽  
Insurance Sector

Purpose The purpose of this paper is to examine the relationship between financial development, openness in financial services trade and economic growth in BRICS countries for the period 1990–2012. Design/methodology/approach An index for financial development has been constructed using principal component analysis technique by including banking sector development, stock market development, bond market development and insurance sector development. For the robustness of the result, the long-run cointegrating relationship amongst the variables has been analyzed. Findings Overall financial development has a positive and significant impact on economic growth. To take the full advantage of openness in financial services trade, countries need to put more emphasis on the development of their stock markets, bond markets and the insurance sector. The result shows that openness in financial services trade has a positive impact on economic growth when the stock market, bond market and insurance sector are included in the system. Research limitations/implications The policy implication of the findings is that policymakers should focus more on developing all four areas of finance to get the full benefit of the financial system on the process of economic growth. Originality/value The authors have constructed the better indicators of financial development in the case of BRICS economies. Most of the studies in BRICS economies have measured the development of the financial sector as either banking sector development or stock market development. However, the present study includes all four areas of finance (banking sector development, stock market development, insurance sector development and bond market development) into account.

Cultural traits and stock market development: an empirical analysis

2015 ◽  
Vol 4 (1) ◽  
pp. 33-49 ◽  
Author(s):  
Nabamita Dutta ◽  
Deepraj Mukherjee
Keyword(s):  
Stock Market ◽  
Uncertainty Avoidance ◽  
Market Development ◽  
Cultural Dimension ◽  
Content Type ◽  
Stock Market Development ◽  
Cultural Trait ◽  
Cross Country ◽  
Cultural Traits

Purpose – During recent times, the stock market has emerged as a major financial institution of an economy. Yet, cross-country differences, in size and role of stock market, persist. The purpose of this paper is to investigate the correlation between cultural traits and the development of the stock market in a country. Considering multiple dimensions of culture, identified in the literature by Hofstede (1980/2001) and World Value Survey, the authors construct the hypotheses: trust, a key cultural trait, should positively influence stock market development; uncertainty avoidance, Hofstede’s cultural dimension should negatively influence the development of the stock market; and individualism, an alternate cultural dimension of Hofstede’s measures, should be positively correlated with stock market development. The cross-country empirical analysis supports the hypotheses. The results hold for multiple measures of stock market development. Design/methodology/approach – This paper investigates the correlation between various cultural traits and the development of the stock market in a country. Specifically, the authors consider three different cultural trait measures. The authors consider a cross-sectional analysis of an extensive number of countries. While all explanatory variables of interest are considered over the period 2000-2007, the authors consider 2008 figures for the dependent variables of interest, financial development. Ordinary least squares is considered as the benchmark specification. Robust regression has been considered as part of robustness analysis. The authors mention throughout the paper that the results stress on significant association between the variables, only. Findings – The empirical results support the hypotheses. The first measure, trust, is positively associated with stock market development of a nation. Statistically, for one standard deviation rise in trust (1 SD=37.5), stock market capitalization will go up between 11 and 19 percentage points. Uncertainty avoidance, the second measure is negatively correlated and statistically, the impact is much greater. Finally, the third measure, individualism, is positively correlated with stock market development. Statistically, for one SD rise in individualism (SD=23.9), stock market capitalization will rise by 23 percentage points. Originality/value – Existing literature has stressed the role of cultural traits – trust, uncertainty avoidance, individualism – in the promotion of entrepreneurship, innovation and growth. Since most startups need to raise capital in order to implement their new ideas, cross-country heterogeneity in the strength of capital markets may lead to important differences in entrepreneurship and productivity growth across economies (Greenwood and Jovanovic, 1990; Jayaratne and Strahan, 1996; Levine, 1997; Beck et al., 2000; Guiso et al., 2004). Yet, the link between stock market development and cultural traits has not been established in the literature. This paper aims to fill this missing link.

scholarly journals Are Banks And Stock Markets Positively Related? Empirical Evidence From South Africa

2010 ◽  
Vol 26 (6) ◽  
Author(s):  
Nicholas M Odhiambo
Keyword(s):  
South Africa ◽  
Stock Market ◽  
Stock Markets ◽  
Real Income ◽  
Market Development ◽  
Bounds Testing ◽  
Critical Question ◽  
Stock Market Development ◽  
Long Run ◽  
Short Run

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><a name="OLE_LINK2"></a><a name="OLE_LINK1"><span style="mso-bookmark: OLE_LINK2;"><span style="color: black; font-size: 10pt; mso-themecolor: text1;" lang="EN-GB"><span style="font-family: Times New Roman;">In this study, we examine the relationship between banks and stock market development in South Africa.<span style="mso-spacerun: yes;">&nbsp; </span>The study attempts to answer one critical question: Are banks and stock markets positively related in South Africa? The bank development is proxied by the ratio of the domestic credit to the private sector to GDP (DCP/GDP), while the stock market development is proxied by the ratio of the stock market capitalisation to GDP (CAP/GDP).Unlike the majority of the previous studies, the current study uses the newly introduced ARDL-Bounds testing approach, as proposed by Pesaran<span style="mso-spacerun: yes;">&nbsp; </span>et al. (2001), to examine this linkage. The empirical results show that there is a distinct positive relationship between banks and stock markets in South Africa. The results apply irrespective of whether the model is estimated in the short run or in the long run. <span style="mso-bidi-font-style: italic;">Other results show that in the short run, the stock market development in South Africa is positively determined by the level of savings, but negatively affected by the rate of inflation and the lagged values of the stock market development. However, in the long run, the stock market is positively determined by real income and the inflation rate. </span><span style="mso-spacerun: yes;">&nbsp;</span></span></span></span></a></p>

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