The relationship between the stock market and foreign direct investment in Croatia: evidence from VAR and cointegration analysis

Arčabić, Vladimir; Globan, Tomislav; Raguž, Irena

doi:10.3326/fintp.37.1.4

Cited by 18 publications

(8 citation statements)

References 18 publications

(13 reference statements)

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“…Faisal, Muhamad, Tursoy, (2016) revealed the positive impact of FDI on the stock market in the long-run period, while in the short-run period, the economists proved the positive impact of the stock market on economic growth and, as a consequence, on the FDI inflow (Faisal, Muhamad, Tursoy, 2016;Arčabić, Globan, Raguž, 2013).…”

Section: The Relationship Between the Stock Market Development And Economic Growthmentioning

confidence: 99%

Relationship Between the Stock Market Development, Banking Sector Development and Economic Growth in the Cee Countries

Yemelyanova

2021

BJES

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The stock markets of most CEE countries have been actively developing and improving over the past decades but they still do not belong to the developed markets according to MSCI classification, the financial systems of these countries tends towards the bank-oriented type. Does the level of stock market development affect economic growth in CEE countries and do these countries need to develop their stock markets accordingly? The purpose of this article is to identify the direction of the causal link between stock market development, banking sector development and economic growth in Central and Eastern European (CEE) countries. The subject of the research is the relationship between the stock market development, banking sector development and economic growth in the CEE countries. Methodology. The research is based on the annual data for two time periods 1999-2012 and 1999-2015 for the 8 and 5 CEE countries, respectively. The study is based on the Granger causality test and linear regression models. According to results of the research the stock market development plays an important role in attracting foreign direct investment and economic growth in CEE countries in the long-run period. There are revealed the channels of indirect influence of the stock market capitalization on the economic growth. Stock market capitalization has impact on the banking sector and gross capital formation, which in turn have impact on the economic growth of CEE countries. There is the impact of both the stock market and the banking sector development on the economic growth in CEE countries during 1999-2015. However, the impact of the stock market size on the economic growth is positive and the impact of domestic credit to private sector is negative. Practical implications. The study proves the reasonable need for the CEE countries to move towards further development of the stock market, improving the market infrastructure and institutional environment in order to expand the size of the stock market and thereby contribute to the economic growth of this countries. Value/originality. The obtained conclusion about the role of the stock market in economic growth and attraction of FDI is of great importance both for Ukraine and other countries with similar trajectory of economic development in general and similar historical aspects of the origin of stock markets in particular and should be taken into account by state leaders when making decisions on the need to create conditions for development of such element of the country’s financial system as the stock market.

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Section: The Relationship Between the Stock Market Development And Economic Growthmentioning

confidence: 99%

Relationship Between the Stock Market Development, Banking Sector Development and Economic Growth in the Cee Countries

Yemelyanova

2021

BJES

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“…Despite the theoretical link between foreign capital inflows and development of stock markets, the nature of relationship in the context of NSE remains an issue of empirical investigation and therefore forms the motivation of the current study. Most empirical studies conducted globally on the effect of foreign capital inflows on stock market capitalization indicate a significant relationship with a few studies indicating insignificant relationship between foreign financial flows and market capitalization (Arcabic et al, 2012;Adam & Tweneboah, 2009;Soumare & Tchana, 2011). Previous studies have therefore failed to provide unambiguous conclusions on the question of the effect of the various components of foreign financial inflows on Stock Market capitalization.…”

Section: Statement Of the Problemmentioning

confidence: 99%

Foreign Capital Flows and Stock Market Capitalization at the Nairobi Securities Exchange, Kenya

Osoro¹,

Simiyu²,

Omagwa³

2020

EJBM

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Since the onset of financial markets liberalization in the early 1990s, the volume of capital inflows to emerging capital markets has grown to unprecedented levels. Despite growth in capital flows, emerging capital markets are characterized by small size and very low liquidity. In the period 2008-2018, the number of listed firms at the Nairobi Securities Exchange increased only by twelve firms from 55 listed firms in the January 2008 to 67 listed firms as at December 2018 giving an average annual increase of approximately one firm per year. This study therefore sought to establish the effect of foreign capital inflows on stock market capitalization at the Nairobi Securities Exchange, Kenya. The study adopted a causal research design and time series data for the period 2008-2018 was analysed using correlation analysis, and the Autoregressive Distributed Lag Model. The findings from correlation analysis indicate that foreign direct investment had a negative and significant effect on stock market capitalization while foreign equity portfolio inflows had negative but insignificant effect on stock market capitalization at the Nairobi Securities Exchange, Kenya. The autoregressive distributed lag test results support the existence a significant short run positive effects of all foreign capital inflows on stock market capitalization as evidenced by the negative and significant coefficient of the Error Correction Term (ECT). However, in the long run foreign direct investment had a significant negative effect on stock market capitalization while the effect of foreign equity portfolio on stock market capitalization was equally negative but insignificant in the long run. In view of the foregoing findings, there is need for the Kenyan government to reconsider its foreign investment policy to target only productive foreign capital inflows. Moreover, the Capital Markets Authority needs to implement policy measures that will attract active participation of the local investors at the Nairobi Securities Exchange.

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“…When uncertainty is high and endogenous, MNEs may prefer high-commitment entry modes (such as FDI) because they contribute to the reduction of uncertainty and provide valuable growth options. Arcabic et al (2013) found in the short run, events on capital markets which send signals regarding domestic investment climate influence foreign investors. De Santis and Ehling (2007) confirm that the movements on the equity markets are the most important determinant of FDI and Portfolio Transactions.…”

Section: Literature Reviewmentioning

confidence: 99%

Diversification strategies and equity market performances

Yavas

Grave

Vardiabasis

2019

RIBS

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Purpose This paper aims to investigate the linkages among foreign direct investment (FDI – greenfield and mergers and acquisitions [M&A]) decisions and equity market returns and volatilities. The main premise is that FDI decisions by multinational enterprises (MNE) are influenced by risk and uncertainty indicated by equity market returns and volatilities in the destination (host) countries. This is so because the events on the stock markets in general and their volatilities in particular signal the vitality of the investment climate of the target market. Understanding volatility in capital markets is important for determining the cost of capital and for evaluating direct investment and asset allocation decisions. Design/methodology/approach Surveys and structured interviews were conducted with senior managers of 11 MNEs based in the USA to collect the data used in this study from November 2017 to October 2018. The paper investigates if FDI decisions of the MNE managers are influenced by risk and uncertainty indicated by equity market returns and volatilities. The paper endeavors to make a contribution to the IB literature in highlighting the role played by equity returns and volatilities in FDI decisions and therewith attempts to integrate finance (capital markets) with international business/strategic decision-making. Findings Capital market performances (returns and volatilities) were found to influence the country choice for location of production facilities (FDI – both greenfield and M&A decisions) as well as timing of the FDI by a MNE. In other words, the share of production capacity optimally located abroad and M&A activities are affected by capital market returns and volatilities.

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The relationship between the stock market and foreign direct investment in Croatia: evidence from VAR and cointegration analysis

Cited by 18 publications

References 18 publications

Relationship Between the Stock Market Development, Banking Sector Development and Economic Growth in the Cee Countries

Relationship Between the Stock Market Development, Banking Sector Development and Economic Growth in the Cee Countries

Foreign Capital Flows and Stock Market Capitalization at the Nairobi Securities Exchange, Kenya

Diversification strategies and equity market performances

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