Does rule of law support the capital market?

Dima, Bogdan; Barna, Flavia; Nachescu, Miruna-Lucia

doi:10.1080/1331677x.2018.1432371

Cited by 13 publications

(8 citation statements)

References 52 publications

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“…This agrees, broadly, with the findings of Yartey, (2008) who investigates these variables in a study on stock market development. Among three institutional variables, BQ shows the most effective impact both in terms of magnitude and significance level, indicating that strong bureaucratic quality provides confidence to the investors that leads to lower risk and increase returns, the results are consistent with Dima et al, (2018) . All the doubtful (control) variables, with some exceptions, show the expected signs with varying degrees of significance.…”

Section: Resultssupporting

confidence: 64%

Does corruption matter for stock markets? The role of heterogeneous institutions

2021

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In examining the role of institutions in resisting corruption and its impact on growth, most studies concentrate on the aggregate level and conclude that sound institutions enhance growth. We focus instead on varying dimensions of heterogeneous institutions in the presence of corruption and their interactive effect on stock returns in four emerging economies: Brazil, Russia, India, and China (BRIC). We pay particular attention to democratic accountability, bureaucratic quality, and law and order. Using monthly data for the first time in this literature, we find that corruption and other weaker institutions lower stock returns during the period 1995-2014. However, interaction effects show interesting mixed results: Bureaucratic quality can mitigate the ill effects of corruption and increase returns by reducing red tape, whereas corruption distorts law and order and lowers stock returns. Our findings suggest that policies to enhance bureaucratic efficiency can abate the adverse effects of corruption, but a restrictive law and order environment tends to lower stock returns.

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Section: Resultssupporting

confidence: 64%

Does corruption matter for stock markets? The role of heterogeneous institutions

2021

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“…In political stability, the Philippines enjoys the lowest scores (12.86), compared to the other ASEAN countries. This is consistent with the insights from Dima et al (2018), who provide evidence that the rule of law positively affects capital market development (the data were taken from 45 countries in a period from 2009 to 2014). Likewise, Mauro (1996) and Hussain et al (2017) also present evidence that corruption has a negative relationship with investment and economic growth.…”

Section: Discussionsupporting

confidence: 89%

Islamic Capital Market Integration and Asymmetric Information: A Study in the Five Asean Countries From the Post-Global Financial Crisis

Qizam

2021

Business: Theory and Practice

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This study aims at examining the integration impact of the five ASEAN Islamic capital markets on asymmetric information for ASEAN Economic Community (AEC) development. Utilizing samples of market and financial panel data from 2009 to 2015 among the five ASEAN Islamic capital markets, and applying two-country portfolios of the Islamic capital markets among the five ASEAN countries to measure the different levels of Islamic capital market integration, this study suggests that the different levels of the Islamic capital market integration between Indonesia and Malaysia are found to result in asymmetric information negatively. The strongest Islamic capital market integration between Indonesia and Malaysia affect reduced asymmetric information more consistently than the other two-country portfolios, while the weakest level of integration between the Philippines and any other four Islamic capital markets that affects asymmetric information inconsistently is also supported. These results confirm an interplay between a modern portfolio theory, Efficient Market Hypothesis (EMH), contract theory, and general economic theory, and also provide new insights for stakeholders in investment decisions and strategies, cross-border regulation of economic resources, and other plentiful benefits.

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“…In this respect, we conclude that the impact is positive, on an upward trend for the entire period under observation ranging within the optimal level of capital adequacy. However, factors could also be of interest here such as the socio-economic factors, the rule of law [40], board composition indicators such as gender related indicators [41] or the strategy implemented regarding risk management [42].…”

Section: Impact Of Igc On Performance In the Italian Banking Sectormentioning

confidence: 99%

Assessing the Impact of Corporate Governance Index on Financial Performance in the Romanian and Italian Banking Systems

Benvenuto

Avram

et al. 2021

Sustainability

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Background: Our study aims to verify the impact of corporate governance index on financial performance, namely return on assets (ROA), general liquidity, capital adequacy and size of company expressed as total assets in the banking sector for both a developing and a developed country. In addition, we investigate the interactive effect of corporate governance on a homogenous and a heterogeneous banking system. These two banking systems were chosen in order to assess the impact of corporate governance on two distinct types of banking system: a homogenous one such as the Romanian one and a heterogeneous one such as the Italian one. The two systems are very distinct; the Romanian one is represented by only 34 banks, while the Italian one comprises more than 350 banks. Thus, our research question is how a modification in corporate governance legislation is influencing the two different banking systems. The research implication of our study is whether a modification in legislation, thus in the index of corporate governance, is feasible for two different banking sectors and what the best ways to increase the financial performance of banks are without compromising their resilience. Methods: Using survey data from the Italian and Romanian banking systems over the period 2007–2018, we find that the corporate governance has a significant, positive and long-lasting effect on profitability and capital adequacy in both countries. Results: Taking the size of the company into consideration, the impact of the Index of Corporate Governance (ICG) on a homogenous banking system is positive while the impact on a heterogeneous banking system is negative. Conclusions: Our study provides evidence of the impact of IGC on financial performance and sheds light on the importance of the size of the company. Therefore, one can state that the corporate governance principles applied do not encourage the growth of large banks in heterogeneous banking sectors, thereby suggesting new avenues of research associated with new perspectives.

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Does rule of law support the capital market?

Cited by 13 publications

References 52 publications

Does corruption matter for stock markets? The role of heterogeneous institutions

Does corruption matter for stock markets? The role of heterogeneous institutions

Islamic Capital Market Integration and Asymmetric Information: A Study in the Five Asean Countries From the Post-Global Financial Crisis

Assessing the Impact of Corporate Governance Index on Financial Performance in the Romanian and Italian Banking Systems

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