Abstract
The purpose of this study is to provide empirical evidence on the effect of institutional quality on stock market performance. In order to evaluate the effect of institutional quality on stock market performance, Calderon Rossell models have been estimated using generalized method of moment’s technique. A panel data of 41 emerging countries for the period 1996 to 2011 is used to estimate the results. The results suggest that institutional quality has a positive and significant influence on stock market performance. Policy makers in emerging countries must follow a parallel policy agenda of improving the quality of their institutions as well as education. These are paramount to the performance of stock markets performance in emerging countries. Key words: institutional quality, stock market, emerging economies, macroeconomic variables.
Highlights
Gani and Ngassam (2008) examine the links between institutional factors and stock market performance in a sample of eight Asian countries with developing as well as mature stock markets
The results of Lombardo and Pagano (2002) confirm the view of Shleifer (1999), who emphasizes that, in order to reap the benefits from market-oriented reforms, policy makers in emerging economies must make sure that a fair level playing field is established, so that investors can focus their attention on exploiting growth opportunities without fearing for their property rights
Policy makers in emerging economies must make sure that a fair level playing field is established, so that investors can focus their attention on exploiting growth opportunities without fearing for their property rights
Summary
Gani and Ngassam (2008) examine the links between institutional factors and stock market performance in a sample of eight Asian countries with developing as well as mature stock markets. These are enough to conclude that economic growth, technology, rule of law and political stability affect capital market performance while poor institutional quality negatively affect it. Countries with strong institutional quality have more liquid stock markets. These articles reviewed very little literature of emerging economies on the effect
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