Stock market development under globalization: Whither the gains from reforms?

Abstract

Over the past decades, many countries have implemented significant reforms (including financial liberalization, privatization, and regulatory and supervisory improvements) to foster domestic capital market development. Despite these policies, the performance of capital markets in several countries has been disappointing. To understand the effects of reforms, we study the impact of six capital market reforms on domestic stock market development and internationalization. We find that reforms tend to be followed by increases in domestic market capitalization and trading. But reforms are also followed by an increase in the share of activity in international equity markets, with potential negative spillover effects.

Corporate Governance and Capital Structure in Brazil: Stock, Bonds and Substitution

“…The different sense for the variables in the NovoMercado and other samples could indicate that the corporate governance reform allowed better information disclosure and shareholder protection, as observed in studies where the relevance of shareholder protection acts were relevant for stock market development (Demirgüc-Kunt & Wurgler, 2000;De la Torre, Gozzi, & Schmukler, 2007;Levine & Zervos, 1998).…”

“…De la Torre, Gozzi and Schmukler (2007) analyzed the impact of corporate governance reforms on stock market development in six countries and found the reforms also stimulated internationalization and increased share values and trading, but increased the risk of contagion from international financial crises. Klein and Olivei (2008) found a significant and economically relevant association among liberalization, financial development, and economic growth from 1976 to 1995 in 95 countries.…”

Does the Sustainable PPI Investments Promote Financial Market’s Sustainable Development?

“…For another, given that sustainable FMD is significant for macroeconomic performance, e.g., economic growth or development [36][37][38], the promotion effect explains why most developing countries actively attract PPI investments although the efficiency of private participation (In fact, the negative feedbacks can be found in any particular type of private participation (see [43] for privatization, see [44] for Public Private Partnerships and see [45][46][47] for concession))is controversial [14].Comparing with the traditional perspective for economic efficiency, the sustainability perspective for FMD conforms more closely to reality. Most relevantly, several scholars study the effect of privatization policies on FMD [16][17][18][19], but they explicitly or implicitly assume that the privatization policy improves industrial efficiency. Their findings are un-robust to the potential inefficiency of private participations.…”

“…Many industrial economists have been "flirting with the idea of PPI and often owed to it" [13], but the efficiency gains of the PPI policy are "neither systematic nor guaranteed" in reality [14]. Most relevant works explicitly or implicitly assume that the privatization policy improves industrial efficiency [15][16][17][18][19][20]. Therefore, the existing literature cannot explain why the PPI policy is prevalent though its efficiency is controversial.…”

Spillovers from the United States to Latin American and G7 stock markets: A VAR quantile analysis

“…We focus our analysis on Latin American stock markets, which have been characterized by a highly positive dynamic in recent decades, in terms of market capitalization and liquidity ratios, after a far-reaching process of market liberalization and reforms to pension funds across the continent during the 80s and 90s (Gill et al, 2005;De la Torre et al, 2007). Moreover, the global financial crisis between 2007 and 2010 appears to have fostered financial flows into LA markets, as capital investors looked for diversification opportunities outside the mature markets, and as liquidity began to flourish around the globe, following persistently low market interest rates in the major economies.…”