Capital Market Development Research Articles

Research on the Applicability of the Capital Asset Pricing Model in the Chinese Market

With the development of China's capital market, how to conduct reasonable asset pricing has become an important issue. More and more scholars have begun to study the application of the classic asset pricing model Capital Asset Pricing Model (CAPM) in the Chinese market. This paper introduces the basic assumptions and conclusions of the CAPM model, and sorts out the application of the CAPM model in different stages, sectors and market cycles of the Chinese market. It also summarizes the changes of scholars' empirical analysis methods at different stages, and draws a conclusion that the overall applicability of the CAPM model in the Chinese market is weak. This paper analyzes the reasons for the weak overall applicability from the perspective of the assumptions of the CAPM model itself and the fit degree of Chinese market characteristics. It summarizes the common methods to improve the applicability of the CAPM model, which are generally divided into two directions: the expansion of CAPM model itself and the localization optimization combined with Chinese market characteristics. This paper provides a reference for scholars and investors to use the CAPM model reasonably, and provides ideas for further improving the applicability of the CAPM model in the Chinese market.

Fostering Capital Markets and Institutional Investor Development in Oman

Despite recent government-led initiatives to improve investor access and encourage participation by local businesses, capital markets in Oman remain relatively small and illiquid and the investor base remains dominated by domestic banks and pension funds. This paper reviews the experiences of other emerging markets in developing local capital markets, and describes the challenges faced in the development of such markets. The review shows establishing a functioning money and local currency bond market remains a critical first step in successful capital markets' development, while several policy tools beyond tax incentives can be employed to support participation in local markets. Increasing the presence of life insurance companies and reducing information asymmetries would help spur demand from a broader set of institutional investors.

Relationship between macroeconomic variables and primary public offerings in Peru

Primary public offerings (PPOs) play an essential role in capital markets by providing financing for projects that contribute directly to a country’s economic development. Macroeconomic conditions have a significant influence on the effectiveness of these offers since they affect the government’s ability to issue sovereign bonds and manage its debt efficiently. Therefore, the present study seeks to determine the relationship between macroeconomic variables and PPOs in the capital market in Peru during the period 2019–2023, employing a quantitative methodology, non-experimental design, basic type, which uses SPSS software for Pearson correlation analysis. The results show that the impact of macroeconomic variables on PPOs is diverse. A weak inverse relationship was identified between public spending and PPOs (correlation of –0.140), suggesting that increases in public spending could discourage the issuance of PPOs. In addition, a moderately strong inverse relationship was found between fiscal deficit and PPOs (correlation of –0.620), indicating that higher fiscal deficits could have a significant negative effect on PPO issuance. A weak negative relationship was also observed between non-financial public sector debt and PPOs (correlation of –0.215), implying that high levels of debt may limit the ability of the capital market to develop new offerings. These findings suggest that, although macroeconomic variables impact PPOs, the magnitude of their influence varies. Furthermore, macroeconomic stability is key to capital market development, given its effect on sovereign bond issuance.

Addressing Information Inequality and Enhancing Minority Shareholder Rights: Corporate Governance Challenges and Sustainable Development in Korea's Capital Market

Addressing Information Inequality and Enhancing Minority Shareholder Rights: Corporate Governance Challenges and Sustainable Development in Korea's Capital Market

Empirical determinants of the relationships between capital market development and economic growth

In this article, a comprehensive review of empirical studies exploring the relationship between capital market development and economic growth is presented. The analysis includes a detailed examination of four theoretical approaches: causal independence, demand-following, supply-leading, and feedback loop hypotheses. Utilizing diverse econometric methods and data from various countries, the findings highlight the complexity and variability of the relationship, influenced by measurement methodologies and specific economic contexts. This study underscores the importance of capital market indicators and their differentiated impacts on economic growth, depending on the structure of the banking and stock market sectors. The results contribute to the understanding of how capital market development interacts with economic growth, offering valuable insights for both developed and developing economies. The article also emphasizes the necessity for further research that incorporates global trends, regulatory environments, and institutional frameworks to deepen our understanding of these relationships.

Corruption Control as a Catalyst for Financial Development: A Global Comparative Study

This study investigates the impact of anti-corruption efforts on financial development across different economies, using G7 and E7 countries as comparative groups. Recognizing corruption as a barrier to economic growth, the research examines how effective corruption control can enhance the efficiency of the financial sector, foreign direct investment (FDI), and capital market development. The methodology includes panel cointegration tests—namely Pedroni, Kao, and Westerlund tests—alongside fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) estimations to assess the long-term relationships between corruption control and financial development. The findings reveal a statistically significant cointegration relationship, suggesting that anti-corruption measures positively influence financial development in both G7 and E7 countries, albeit more strongly in E7 economies. Specifically, the Westerlund test results, which take cross-sectional dependencies into account, reinforce the robustness of the findings. The study underscores the importance of tailoring anti-corruption policies to each country’s unique economic framework, highlighting that while G7 countries benefit from advanced institutional structures, E7 countries experience more pronounced effects of corruption control on financial development and FDI. These insights contribute to the policy discourse on sustainable economic development by emphasizing the role of governance quality in fostering robust financial systems and attracting international investment.

Stock Liquidity and Corporate Investment Efficiency

For a long time, investment has played a key role in stimulating the economic growth of our country, but the low investment efficiency of listed companies has hindered listed companies from entering the stage of high-quality development. With the reform of financial market and the rapid development of China's capital market, the impact of capital market on the investment efficiency of listed companies has been paid more and more attention. Relevant studies have shown that stock liquidity can have an obvious effect on internal factors such as stock price information content, agency cost, management compensation incentive, etc., and then can have a certain effect on its investment efficiency. This paper selects A-share non-financial listed companies from 2013 to 2022 for empirical test, and finally draws A relatively robust conclusion: stock liquidity has a promoting effect on enterprise investment efficiency.

RESEARCH ON THE IMPACT OF EXECUTIVES’ OPPORTUNISTIC REDUCTION OF HOLDINGS ON CORPORATE STOCK PRICE VOLATILITY RISK

The stock market is an important part of the national economy, and its stable operation is indispensable for the prevention and control of financial market risks. How to effectively regulate the share reduction of senior executives is a major issue facing the high-quality development of my country's capital market. This paper selects China's A-share non-financial listed companies from 2007 to 2022 as the research sample. The mechanism analysis shows that the opportunistic reduction of executives can positively affect the risk of corporate stock price volatility through financing constraints. This paper also looks at how economic policy uncertainty affects the link between opportunistic firing of executives and the risk of corporate stock price volatility. This not only adds to the current research, but it also makes some good suggestions for how to stop opportunistic firing of executives and stop the risk of corporate stock price volatility.

Key Factors in the Development of Capital Markets Globally

This research paper investigates the impact of macroeconomic and institutional factors on the development of capital markets, measured as the ratio of market capitalization to gross domestic product (GDP), on panel data from 47 stock exchanges, both mature and developing markets, from 2008 to 2020. Despite overall economic growth and an increase in market capitalization to GDP ratio between 2008 and 2020, nearly half of the markets experienced negative trends in the post-pandemic and wartime period of 2020. Key findings from regression and VAR models highlight the significant influence of local bank credit, political stability, and broad money on capital market development, with a positive long-term impact of lending interest rates, but a negative effect of foreign direct investment on market capitalization. Policy recommendations include focusing on political stability, promoting financial intermediation, improving SME access to credit, and maintaining moderate inflation and low-interest rates to foster a stable investment environment and encourage public participation in capital markets through education initiatives.

The Speed of Adjustment of Capital Structure of Nigerian Quoted Firms

ABSTRACT: The presence of financing frictions motivates the use of dynamic panel adjustment models to describe the evolution of debt ratios and the adjustment of leverage to optimal target ratios. The purpose of this study is to investigate the pattern of capital structure and speed of adjustment of capital structure from a developing country perspective. Capital structure variation is the norm rather than the exception. Under the classical trade-off theory of capital structure, firms' optimal debt levels occur at the point where the marginal tax benefit of debt equates the marginal cost of bankruptcy but this theoretical corner solution has been challenged by a debt conservatism puzzle in both the theoretical literature (Graham, 2000) and empirical literature in Nigeria (Paseda and Adedeji, 2020; Paseda, 2021). The classic (S, s) model provides a robust framework for allowing debt ratios to drift between two tolerable (upper and lower) limits. Using a sample of 50 non-financial quoted Nigerian firms over the period 1999-2019, debt ratios exhibit strong influences from firm-level variables, confirming trade-off, pecking order and market timing predictions. With respect to macroeconomic variables, the target leverage and lower refinancing thresholds exhibit pro-cyclical behavior while the upper limit is counter-cyclical. The study breaks new grounds by shedding light on the forces driving the behavior of the refinancing spread. The refinancing spread is positively impacted by the age of the firm as well as market timing but inversely by marginal tax rate and dividend payout ratio. The direct implication is that older firms and companies whose securities' prices are more subject to volatility exhibit greater financial flexibility relative to the relatively younger counterparts. Target zone model exhibited by the classic (S, s) methodology, thus, appears a closer description of debt dynamics. An exciting feature of this (S,s) model is that it separates the influences on the target leverage from those factors that influence the upper and lower leverage thresholds such that the target is unobscured by the leverage adjustment mechanism that occurs between refinancing events. This is an advantage over nested traditional regression frameworks which represent simultaneous combination of these forces. Thus, the resulting target zone models are informative in addressing core capital structure issues such as target behavior and refinancing issues. As the empirical results show, studying refinancing limits in addition to target leverage increases the understanding of firms' financing decisions. The study implications can be generalized to markets with similar institutional characteristics such as rule of law, capital market efficiency and development, economic growth and financial depth.

Assessing the impact of capital market development, income level, and institutional quality on entrepreneurship in Africa

Assessing the impact of capital market development, income level, and institutional quality on entrepreneurship in Africa

ANALISIS TANTANGAN DAN KONTRIBUSI PASAR MODAL SYARIAH TERHADAP PERTUMBUHAN EKONOMI DI INDONESIA

This study aims to examine the development and regulation of the sharia capital market in Indonesia, as well as its impact on economic growth. The Islamic capital market is increasingly in demand by Muslim investors because of its adherence to sharia principles, which also increases market stability and liquidity. The method used in this study is library research which is carried out by collecting information and data through various sources available in the library. both related to laws, fatwas, books, reports, and relevant scientific publications. The findings of the study show that the Islamic capital market in Indonesia has made a major contribution to economic growth, by recording an increase in market capitalization, the number of sharia stocks, sharia bonds (sukuk), and sharia mutual funds. This development reflects investor confidence and the attractiveness of the Islamic capital market as an alternative investment that is in line with Islamic principles. In addition, the Islamic capital market also plays a role in funding the real sector, including MSMEs, through the Securities Crowdfunding (SCF) scheme, which further strengthens its contribution to the Indonesian economy.

STOCK PRICE FORECASTING USING THE HYBRID ARIMA-GARCH MODEL

In the current era, many people have made investments, namely capital investment activities within a certain period to seek and get profits. One of the most popular investment instruments in the capital market is stocks, which consist of conventional stocks and Islamic stocks. Conventional stocks are shares traded on the stock market without adhering to Sharia principles. In contrast, Sharia-compliant stocks meet Islamic principles and are traded in the sharia capital market. One form of development of the Islamic capital market in Indonesia is the existence of the Indonesian Sharia Stock Index (ISSI), which projects the movement of all Islamic stocks on the Indonesia Stock Exchange (IDX). Stock prices change every day so modeling is needed that can be used by investors to determine decisions. The Autoregressive Integrated Moving Average (ARIMA) model is one of the forecasting models that is applicable. Stock prices have volatility that tends to be high, this results in variance that is not constant or there is a heteroscedasticity problem, at the same time the ARIMA model must fulfill the assumption of homoscedasticity. Therefore, it is necessary to combine the ARIMA model with a model that can overcome the problem of heteroscedasticity, namely the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. This research aims to get the best hybrid ARIMA-GARCH model that will be used to forecast the stock price of the ISSI. The daily closing data of the ISSI stock price from May 4, 2020, to January 13, 2023, is the data that was used. The study’s findings suggest that ARIMA (0,1,3)-GARCH (2,0) is the best model among all possible models for ISSI stock price forecasting. By evaluating the predictive accuracy of the model using Mean Absolute Percentage Error (MAPE), the forecasting result for ISSI stock prices using the best model, ARIMA(0,1,3)-GARCH(2,0) at 0,6092%, shows a forecasting that is close to the actual data, which means that the model used is highly effective at forecasting stock priced

Research on the Regulation and Compliance of ESG Information Disclosure in the Securities Market

The disclosure of ESG information only depends on the voluntary disclosure of enterprises, which cannot ensure the openness and transparency of public information. Therefore, the supervision of the disclosure of ESG information is particularly important. Although China is gradually strengthening the ESG information disclosure requirements for listed companies, the regulatory framework for ESG information disclosure in China still needs to be optimized due to the differences in localization, small scope of disclosure, and large differences in evaluation system and standard system. This paper analyzes the current situation of ESG information disclosure in China, including the overall disclosure situation, the disclosure characteristics of different enterprises and industries, and the current situation of carbon emissions disclosure. The article points out the problems in the supervision system, such as the imperfection of supervision basis, the singleness of supervision subject and the insufficiency of supervision cooperation mechanism. On this basis, this paper puts forward some suggestions to improve the regulatory basis, build multiple collaboration subjects and optimize the regulatory collaboration mechanism, in order to improve the quality and efficiency of ESG information disclosure and promote the healthy development of China's capital market.

Economic Integration and Economic Growth in ECOWAS Nations

The study explored the relationship between economic integration and economic growth in ECOWAS from 1986 to 2023. It utilized panel ARDL techniques, employing Pooled Mean Group (PMG) and Mean Group (MG) estimators, along with the Dumitrescu & Hurlin Granger non-causality test. The findings revealed that economic integration positively correlates with economic growth in both the short and long term, although significance is only evident in the long run. In contrast, trade integration showed a positive but insignificant relationship with economic growth across both timeframes, while financial integration exhibited a negative and insignificant relationship with growth in both the short and long term. The causality test indicated that economic integration has a one-way causation toward economic growth; there are bidirectional causal links between trade integration and economic integration; a two-way causation exists between financial integration and economic integration; and there is a one-way causal relationship from trade integration to financial integration. Based on these findings, the study recommends that policymakers in ECOWAS prioritize the deepening and sustaining of economic integration initiatives, with a focus on enhancing regional cooperation in infrastructure, trade policies, and regulatory frameworks to achieve long-term growth benefits. To strengthen trade integration, ECOWAS countries should invest in export capacity, reduce bureaucratic hurdles, and support competitive industries while implementing trade facilitation and capacity- building programs. The negative impact of financial integration on growth underscores the need to bolster financial systems by improving regulatory oversight, advancing capital market development, and promoting financial stability through robust institutional frameworks. Moreover, it is essential to establish stronger regional institutions to monitor financial and trade flows and provide technical support for effectively managing and harmonizing integration processes.

Does financial inclusion and financial openness matter for capital market development? Evidence from a panel ARDL-PMG approach

Purpose This study aims to examine the effect of financial inclusion (FI) and financial openness (FO) on the development of capital markets in Africa. Design/methodology/approach The study uses data from 34 countries over 18 years (2004–2021) and adopts the panel autoregressive distributed lag and pooled mean group approach, with economic growth, trade openness, government expenditure and institutional quality as control variables. Findings The analysis reveals that both FI and FO contribute to the long-term development of capital markets across all income levels within the sampled countries. The interaction between FI and FO enhances capital market development (CMD) over the long run. This finding indicates that FO particularly enhances the development of capital markets in economies with comparatively lower levels of FI. Practical implications The findings of this research underscore the importance for policymakers and professionals to adopt guidelines and regulations that promote FI and openness. Such measures can bolster the development of strong financial systems by improving access to the formal financial sector, and by contributing to the growth of capital markets. Originality/value The study is robust to the use of a multidimensional financial and CMD index. It is one of the pioneering studies that explore the relationship between FI and FO, and how this interaction influences CMD.

Foreign Portfolio Investment and Capital Market Development in Nigeria

This study investigates the impact of foreign portfolio investment (FPI) on the development of the Nigerian capital market from 1986 to 2023, addressing challenges such as exchange rate volatility and inadequate technological advancement. The research aims to explore the following questions: What is the relationship between foreign portfolio investments and capital market development in Nigeria? How do exchange rate volatility influence the capital market development in Nigeria? What role do technological advancements play in enhancing market performance and attracting foreign investors? Data were sourced from the Central Bank of Nigeria Statistical Bulletin and the National Bureau of Statistics. A quantitative methodology was employed, utilizing the Johansen co-integration test, Vector Error Correction Model (VECM), and Granger causality test to analyze secondary time-series data. The Johansen co-integration test revealed a long-run relationship among the variables, while the VECM indicated that FPI negatively impacts market capitalization. Additionally, the Granger causality test demonstrated unidirectional causality from capital market development to FPI. To address the identified challenges, the study recommends that policymakers create a more supportive environment that ensures foreign investors can repatriate capital and earnings. The government should prioritize exchange rate stability that reflects market realities to enhance investor confidence. Investments in advanced technology are crucial to improving efficiency and accountability in market transactions. By adopting these targeted recommendations, Nigeria can better leverage FPI to foster capital market growth and promote sustainable economic development. JEL Codes: G15, O16

Corporate governance and capital market development in the GCC: a comparative literature review

PurposeThis review provides a detailed analysis of corporate governance practices across Gulf Cooperation Council (GCC) countries, focusing on board characteristics, executive remuneration, capital markets and the integration of ethical and sustainable practices. It evaluates how these governance frameworks influence market performance, investor confidence and corporate sustainability within the region.Design/methodology/approachThe study synthesizes findings from 15 recent research studies, examining corporate governance mechanisms, board composition, executive compensation policies and their impact on market capitalization. The data were collected from major academic databases, including Google Scholar, Springer, Web of Science and Scopus.FindingsThe analysis exhibits both similarities and differences in corporate governance frameworks across GCC countries. Important findings include a universal mandate for the separation of chief executive officer (CEO) and chairman roles, varied board composition requirements and differing executive remuneration and transparency policies. Saudi Arabia and the United Arab Emirates (UAE) lead in market capitalization, reflecting advanced governance practices, though disparities exist among GCC countries. The review also notes the increasing alignment of corporate governance with corporate social responsibility (CSR) principles, especially in sustainability reporting and ethical practices, highlighting a growing commitment to long-term value creation.Originality/valueThis review uniquely synthesizes recent research on GCC corporate governance, offering insights on board structures, executive pay and market dynamics with a focus on ethical and sustainable practices. It provides valuable perspectives for stakeholders, policymakers and academics interested in enhancing governance frameworks in the region while contributing to the global discourse on aligning corporate governance with sustainability standards.

Data assetization and capital market information efficiency: evidence from Hidden Champion SMEs in China

Data assets serve functions such as value preservation and appreciation, financing, and value creation. They contain extensive information about enterprises’ operational status and future development prospects, providing significant references for external investors’ decision-making and greatly impacting the information efficiency in capital market. This study examines the correlation between data assetization and capital market information efficiency, along with the mechanisms and influencing factors involved. We select a sample of Chinese Hidden Champion small and medium-sized enterprises (SMEs) from 2011 to 2021, utilize text analysis methods to build a data assets dictionary, and extract keywords from corporate annual reports to depict the level of data assetization. The research results indicate that data assetization significantly enhances the information efficiency of capital market, specifically reducing stock price synchronicity and stock price delay. By categorizing data assets into own-use data assets and transactional data assets, we find that both types can improve the information efficiency of the capital market. Mechanism analysis reveals that enterprise data assetization can enhance the information efficiency of capital market by alleviating corporate financing constraints and improving forward-looking information disclosure. Factors analysis demonstrates that digital infrastructure and data circulation transactions can strengthen the enhancement effect of data assetization on the information efficiency of capital market. This study enriches the research outcomes in the micro-research field of data assets, providing valuable insights for promoting the digital transformation of Hidden Champion SMEs and the high-quality development of capital market.

Effect of capital market on economic growth: An analysis using the autoregressive distributed lag (ARDL) approach

The limits testing method known as ARDL (Autoregressive Distributed Lag) examines Nigerian capital market improvement and monetary development. Relevant indicators about the capital market are taken into account during analysis while considering influencing factors as well. This study aims to explore the relationship between the capital market and financial development in Nigeria. The study’s theoretical framework, which is based on the ARDL framework, includes both short- and long-term dynamics. The data used in this analysis was collected from the Central Bank of Nigeria (CBN), the World Bank database, and the Nigerian Stock Exchange (NSE). In this study, the Nigerian All-Share Index, foreign direct investment, currency exchange rates, and inflation rates are the free factors, while the increase in GDP is the dependent factor. Through cointegration analysis using the ARDL framework, it was discovered that in Nigeria there’s a lengthy equilibrium correlation between economic expansion and financial development. The coefficients determined allow for a deeper understanding of how capital market factors affect economic growth over time. Furthermore, utilizing an error correction model derived from the ARDL analysis offers insight into both brief dynamics and modified speed toward reaching a lasting state of balance. By utilizing the ARDL approach, this study adds to the continuing discourse surrounding how capital markets impact growth in Nigeria. Its empirical evidence provides valuable knowledge for policymakers and stakeholders looking to utilize capital markets effectively toward achieving long-lasting economic development within the country.