Abstract

Stock market plays a significant role in corporate financing. However, stock market movements were highly affected by certain external factors such as economic, psychological and political factors. By using the sample of 10 Asian countries, this study intends to investigate the impacts of macroeconomic and corruption factors on the stock market development. The sample period covered from the year 2003 to 2015. The dependent variable used in this study was stock market development. Whilst, the variables of interest used in this study were i) income level, ii) savings, iii) foreign direct investment, iv) value of stocks traded, v) money supply and vi) corruption perception index (CPI). A panel data approach had been applied in testing the relationship between the variables due to the nature of data. As expected, the gross domestic savings, foreign direct investment, and money supply were found to have a significant relationship with stock market development. On the other hand, the income level found to have a significant negative relationship with the stock market development. Noteworthy, the results also indicated that lower corruption level could lead to the growth of stock market development. Thus, a change in corruption level was the important matter to be considered before making any investment decision as corruption level had a significant impact on the stock market development.

Highlights

  • Interested groups, including policymakers, are concerned that consumers lack a working knowledge of financial concepts and do not have the tools they need to make decisions most advantageous to their economic well-being (Braunstein and Welch, 2002)

  • In the context of Malaysia, statistics issued by Malaysian Insolvency Department (MDL) show that number of individual person declared bankrupt is keep increasing from year to year

  • There are more than 50% Chinese respondents and respondents from other ethnicity who scored 6 or more correct responses

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Summary

Introduction

Interested groups, including policymakers, are concerned that consumers lack a working knowledge of financial concepts and do not have the tools they need to make decisions most advantageous to their economic well-being (Braunstein and Welch, 2002). It has been argued that the most concerning issues regarding the low levels of financial literacy among consumers is the possible negative effects for economic behavior (Hogarth et al, 2005) including lack of saving (Lusardi and Mitchell, 2007). In the context of Malaysia, statistics issued by Malaysian Insolvency Department (MDL) show that number of individual person declared bankrupt is keep increasing from year to year. These bankruptcy cases have been argued as, to some extent, reflect poor money management skills amongst Malaysian (Anwar, 2011)

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