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Impact of government integrity and corruption on sustainable stock market development: linear and nonlinear evidence from Pakistan

Author

Listed:
  • Kashif Islam

    (University of Sahiwal)

  • Ahmad Raza Bilal

    (The University of Lahore)

  • Zeeshan Saeed

    (Liverpool John Moores University)

  • Samina Sardar

    (University of Sahiwal)

  • Muhammad Husnain Kamboh

    (University of Sahiwal)

Abstract

The purpose of this paper is to understand the comparative symmetric and asymmetric impact of government integrity (GI) and corruption control (COC) on the sustainable stock market development (SMD) in Pakistan. The authors employed two comparative approaches ARDL and NARDL, by using the annual time-series data of last 30 years (1991–2020) of the Pakistan Stock Exchange. Both variables have shown highly significant association with SMD. This paper points at comparative findings under ARDL and NARDL frameworks. The results under ARDL Bounds tests indicate that GI and COC positively influence the pace of the equity market in Pakistan. But the asymmetric impact under NARDL indicates that the negative asymmetric cumulative dynamic multiplier (ACDM) of corruption has a strong positive impact on SMD of Pakistan with a coefficient of 1.32. The positive ACDM of COC indicates an inverse impact on the SMD, with a higher coefficient of − 2.188, that indicates partial causality. The impact of positive ACDM of GI is highly significant with a coefficient of 4.51, that indicates GI’s long-lasting impact on SMD, but the decrease in GI does not have significant decreasing impact. We concluded that higher GI reduces the equity investment barriers and promotes the local stock market by direct control of corruption.

Suggested Citation

  • Kashif Islam & Ahmad Raza Bilal & Zeeshan Saeed & Samina Sardar & Muhammad Husnain Kamboh, 2023. "Impact of government integrity and corruption on sustainable stock market development: linear and nonlinear evidence from Pakistan," Economic Change and Restructuring, Springer, vol. 56(4), pages 2529-2556, August.
    • Handle: RePEc:kap:ecopln:v:56:y:2023:i:4:d:10.1007_s10644-023-09523-7
    DOI: 10.1007/s10644-023-09523-7
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