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Government quality determinants of stock market performance in developing countries

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  • Simplice A, Asongu

Abstract

How do government policies and institutions affect stock market performance? As stock markets grow broader and deeper in developing countries, the question becomes more critical. Government quality dynamics of corruption-control, government-effectiveness, political-stability or no violence, voice and accountability, regulation quality and rule of law are instrumented with income-levels, religious-dominations, press-freedom degrees and legal origins to account for stock market performance dynamics of capitalization, value traded, turnover and number of listed companies. The results demonstrate a significant positive association between stock market performance measures and the quality of government institutions. These findings suggest countries with better developed government institutions would favor stock markets with higher market capitalization, better turnover ratios, higher value in shares traded and a greater number of listed companies.

Suggested Citation

  • Simplice A, Asongu, 2011. "Government quality determinants of stock market performance in developing countries," MPRA Paper 35508, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35508
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial Markets; Government Policy; Political Economy;
    All these keywords.

    JEL classification:

    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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