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Democracy and market crashes: Evidence from a worldwide panel of countries

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  • Apergis, Nicholas

Abstract

This paper investigates the role of democracy for predicting market crashes. A panel regression specification attempts to unravel the impact of democracy on the skewness of the American Depositary Receipts (ADRs). The analysis uses an approach that accounts for the effect of democracy on the manner financial market crashes are endogenously determined by market structures. The results provide strong supportive evidence that countries with stronger democratic regimes experience higher positive skewness in asset returns, indicating less likelihood of market crashes.

Suggested Citation

  • Apergis, Nicholas, 2017. "Democracy and market crashes: Evidence from a worldwide panel of countries," Finance Research Letters, Elsevier, vol. 22(C), pages 244-248.
    • Handle: RePEc:eee:finlet:v:22:y:2017:i:c:p:244-248
    DOI: 10.1016/j.frl.2016.12.014
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    References listed on IDEAS

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    Cited by:

    1. Wafa Ghardallou, 2022. "Financial System Development and Democracy: a Panel Smooth Transition Regression Approach for Developing Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 1714-1735, June.
    2. Akçay Selçuk & Karasoy Alper, 2020. "Determinants of private investments in Turkey: Examining the role of democracy," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 23-49, March.
    3. Wafa Ghardallou & Dorsaf Sridi, 2020. "Democracy and Economic Growth: a Literature Review," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(3), pages 982-1002, September.

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    More about this item

    Keywords

    Democracy; Market crashes; American Depositary Receipts; Panel data analysis; 56 countries;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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