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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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35508.

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Date of creation: 20 Dec 2011
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Handle: RePEc:pra:mprapa:35508

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Keywords: Financial Markets; Government Policy; Political Economy;

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  1. Simplice A. Asongu, 2012. "Law and Finance in Africa," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(4), pages 385-408.
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  10. Asongu Simplice, 2011. "Law, finance, economic growth and welfare: why does legal origin matter?," Working Papers 11/007, African Governance and Development Institute..
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  13. Simplice A., Asongu, 2011. "Law, Finance and Investment: does legal origin matter?," MPRA Paper 34698, University Library of Munich, Germany.
  14. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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