Stock market development: an analysis from a multilevel and multi-country perspective

Abstract

Stock markets have been rapidly developed around the world during the last 20 years. Accordingly, there is sincere academic interest in understanding the determinants of this phenomenon. Most studies advocate that the development of a stock market is influenced by a few individual country variables such as the origin of its legal system, enforcement of law, accounting patterns, transparency, corporate ownership structure, and the level of creditor and minority investor protection. This paper extends previous empirical literature concerning the determinants of stock market development. We built a unique sample of 50 countries, ranging from those with emerging to developed economies. From a set of 60 potential variables, 12 factors were employed using multiple regression. The research breaks new ground by using different constructs taken from financial literature, such as the Human Development Index (HDI, 2010), Managerial Skills of Entrepreneurs and Democracy of the Country. Results showed that more factors may influence the development of stock markets, such as the adaptability of firms and the openness of a country, helping avoid the multicollinearity effects that may have affected earlier studies.

Determinant of Downward Auditor Switching

“…As a core component of the modern economy, finance, such as stock market, is attracting increasingly more attention and given its influence on economic growth (Baranidharan & Vanitha, 2016;Niblock, Heng, & Sloan, 2014;Otisitswe & Moffat, 2015;Yao, Wu, & Kinugasa, 2015), and an indicator of an economy financial health (Tachiwou, 2010). As intermediaries industry, financial development, includes stock market development (Kargbo, Ding, & Kabia, 2015), have effect on business cycle (Hwang & Lee, 2013) and support allocation of resources for productive opportunities (Forti, Tsang, & Peixoto, 2011). It shows that stock market is one of important sector to improve business activities.…”

“…(3) developed markets with liquidity, volume and regulation stimulate businesses at a firm-level; (4) shareholder activity reflects the expectations of the main market players, as well as their opinions about both domestic and international states of economic affairs; (5) an efficient stock market has a fundamental role in attracting, maximizing, consolidating and retaining external capital. It indicates the mood of investors (Tachiwou, 2010) as well as corporate governance mechanism by political and legal structure, public monitoring (Forti, Tsang, & Peixoto, 2011), investor protections and public policy making (Guillen & Capron, 2016). These five points of developed stock markets by Forti, Tsang, & Peixoto (2011) lead to governance mechanism that reduce information assymmetric, one of ways is provide high quality auditor.…”

“…It indicates the mood of investors (Tachiwou, 2010) as well as corporate governance mechanism by political and legal structure, public monitoring (Forti, Tsang, & Peixoto, 2011), investor protections and public policy making (Guillen & Capron, 2016). These five points of developed stock markets by Forti, Tsang, & Peixoto (2011) lead to governance mechanism that reduce information assymmetric, one of ways is provide high quality auditor. By reducing downward auditor switching, high quality auditor will be maintained as well as maintain condition of developed stock market.…”

“…By reducing downward auditor switching, high quality auditor will be maintained as well as maintain condition of developed stock market. Stock market development shows the openness of a country and its stock market, stock market efficiency (investor protection and financial structure), and management practices (adaptability of a firm to market change, health, safety and environment concerns, and entrepreneurship) (Forti, Tsang, & Peixoto, 2011). In ASEAN countries; such as Indonesia, Malaysia, Philippines, Thailand; stock market development decreasing caused by dominance of family ownership (Noordin & Law, 2008).…”

Moderating role of firms’ rank in ASEAN corporate governance scorecard on effect of foreign ownership on firm value

“…Further, Madhani (2016) added that corporate governance provides an ethical process as well as welldefined structure through which the objectives of the firm, the means of attaining such objectives, and systems of monitoring performance are also set. Corporate governance in stock market could be seen as corporate governance mechanism by political and legal structure, public monitoring (Forti, Tsang, & Peixoto, 2011), investor protections and public policy making (Guillen & Capron, 2016) to increases firm market value. ASEAN Capital Market Forum (2015) introduce ASEAN corporate governance scorecard as assessment of corporate governance of all listed firms of capital markets in countries of ASEAN.…”