IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/15452.html
   My bibliography  Save this paper

Information Transmission and Micro-structure rents in Emerging Markets

Author

Listed:
  • Siddiqi, Hammad

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.

Suggested Citation

  • Siddiqi, Hammad, 2009. "Information Transmission and Micro-structure rents in Emerging Markets," MPRA Paper 15452, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:15452
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/15452/1/MPRA_paper_15452.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Jamshed Y. Uppal & Inayat U. Mangla, 2006. "Market Volatility, Manipulation, and Regulatory Response: A Comparative Study of Bombay and Karachi Stock Markets," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 1071-1083.
    3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    4. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring.
    5. 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.
    6. Miller, Merton H & Rock, Kevin, 1985. "Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-1051, September.
    7. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Siddiqi, Hammad, 2008. "Information Transmission in Emerging Markets: The Case of a Unique Financing Instrument," MPRA Paper 6714, University Library of Munich, Germany.
    2. Andy Lardon & Marc Deloof, 2014. "Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext Free Market," Small Business Economics, Springer, vol. 42(2), pages 361-385, February.
    3. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    4. Sofiane DELFOUF, 2016. "The Determinants of the Financing Decision: A panel Data Study of Listed Firm in Malaysian Stock Exchange (2005-2016)," Turkish Economic Review, KSP Journals, vol. 3(4), pages 668-676, December.
    5. Manish Gupta, 2011. "Dividends and Cost of Capital - An Empirical Study on REITs," ERES eres2011_56, European Real Estate Society (ERES).
    6. Luc Renneboog & Peter G. Szilagyi, 2008. "Corporate Restructuring and Bondholder Wealth," European Financial Management, European Financial Management Association, vol. 14(4), pages 792-819, September.
    7. Brav, Alon & Graham, John R. & Harvey, Campbell R. & Michaely, Roni, 2005. "Payout policy in the 21st century," Journal of Financial Economics, Elsevier, vol. 77(3), pages 483-527, September.
    8. Babl, Christian & Fausel, Andreas & Kuhlman, Leonard & Schiereck, Dirk, 2014. "Werteffekte auf Anleiheemissionen: Eine Note für deutsche Emittenten," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 68(1), pages 8-22.
    9. Ester Chen & Ilanit Gavious & Nadav Steinberg, 2019. "Dividends from unrealized earnings and default risk," Review of Accounting Studies, Springer, vol. 24(2), pages 491-535, June.
    10. Paulo, Alves, 2018. "Abnormal retained earnings around the world," Journal of Multinational Financial Management, Elsevier, vol. 46(C), pages 63-74.
    11. Turner, John D., 2014. "Financial history and financial economics," QUCEH Working Paper Series 14-03, Queen's University Belfast, Queen's University Centre for Economic History.
    12. Hunjra, Ahmed Imran & Bilal, Muhammad & Shafi, Haroon & Ullah, Ikram & Rehman, Kashif-Ur-, 2010. "Patterns of capital structure and dividend policy in Pakistani corporate sector and their impact on organization performance," MPRA Paper 40658, University Library of Munich, Germany.
    13. Faruk Bostanci & Eyup Kadioglu & Guven Sayilgan, 2018. "Determinants of Dividend Payout Decisions: A Dynamic Panel Data Analysis of Turkish Stock Market," IJFS, MDPI, vol. 6(4), pages 1-16, November.
    14. Yin, Libo & Nie, Jing, 2021. "Adjusted dividend-price ratios and stock return predictability: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 73(C).
    15. Apergis, Nicholas & Chasiotis, Ioannis & Georgantopoulos, Andreas G. & Konstantios, Dimitrios, 2021. "The integration of share repurchases into investment decision-making: Evidence from Japan," International Review of Financial Analysis, Elsevier, vol. 78(C).
    16. Anton Miglo, 2020. "Zero-Debt Policy under Asymmetric Information, Flexibility and Free Cash Flow Considerations," JRFM, MDPI, vol. 13(12), pages 1-25, November.
    17. Garay, Urbi & González, Maximiliano & Guzmán, Alexander & Trujillo, María Andrea, 2013. "Internet-based corporate disclosure and market value: Evidence from Latin America," Emerging Markets Review, Elsevier, vol. 17(C), pages 150-168.
    18. Loncarski, I. & Ter Horst, J.R. & Veld, C.H., 2006. "Why do Companies issue Convertible Bond Loans? An Empirical Analysis for the Canadian Market," Discussion Paper 2006-65, Tilburg University, Center for Economic Research.
    19. Robert A. Korajczyk & Deborah Lucas & Robert L. McDonald, 1990. "Understanding Stock Price Behavior around the Time of Equity Issues," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 257-278, National Bureau of Economic Research, Inc.
    20. Dong, Ming & Robinson, Chris & Veld, Chris, 2005. "Why individual investors want dividends," Journal of Corporate Finance, Elsevier, vol. 12(1), pages 121-158, December.

    More about this item

    Keywords

    Information transmission; Signaling; Microstructure rents; Linked games; Institutional inertia;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • 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)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:15452. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.