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Information Transmission and Micro-structure rents in Emerging Markets

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Author Info
Siddiqi, Hammad

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Abstract

This paper offers a first ever theoretical study of a unique financing instrument associated with prominent emerging equity markets in South Asia. The instrument known as badla, in local parlance, has two interesting aspects, which have been ignored thus far. Firstly, it may serve as an information transmission mechanism and can be thought of as an institutional response to information gaps in the emerging markets. Secondly, it creates new types of rents, called “market microstructure” rents for certain market players. These rents are then exploited to gain control of the governing boards of equity markets. Consequently, institutional inertia is created which hinders the badly needed reform process.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15452.

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Date of creation: 10 Feb 2009
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Handle: RePEc:pra:mprapa:15452

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Related research
Keywords: Information transmission; Signaling; Microstructure rents; Linked games; Institutional inertia;

Find related papers by JEL classification:
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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  1. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September. [Downloadable!] (restricted)
  2. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  3. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June. [Downloadable!] (restricted)
  5. Berkman, Henk & Eleswarapu, Venkat R., 1998. "Short-term traders and liquidity: a test using Bombay Stock Exchange data," Journal of Financial Economics, Elsevier, vol. 47(3), pages 339-355, March. [Downloadable!] (restricted)
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