[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1622.html
   My bibliography  Save this paper

Capital control liberalization and stock market development

Author

Listed:
  • Levine, Ross
  • Zervos, Sara
Abstract
The authors address two questions: What happens to stock market size, liquidity, volatility, and integration with world capital markets after capital controls are liberalized And what is the relationship between those indicators of stock market development and regulations about information disclosure, accounting standards, and investor protection An analysis of data on stock markets in 16 developing countries suggests the following: a) stock markets become larger, more liquid, more integrated internationally, and more volatile after controls on capital and dividend flows are liberalized; b) easy access to information about firms is positively associated with the size and liquidity of stock markets; and c) countries that officially establish internationally accepted accounting standards and laws to protect investors do not have substantially better- functioning stock markets than countries that do not adopt those official standards.

Suggested Citation

  • Levine, Ross & Zervos, Sara, 1996. "Capital control liberalization and stock market development," Policy Research Working Paper Series 1622, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1622
    as

    Download full text from publisher

    File URL: http://documents.worldbank.org/curated/en/436601468739562477/pdf/multi-page.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:bla:jfinan:v:44:y:1989:i:3:p:681-96 is not listed on IDEAS
    2. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-1329, December.
    3. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    4. Errunza, Vihang & Losq, Etienne, 1985. "International Asset Pricing under Mild Segmentation: Theory and Test," Journal of Finance, American Finance Association, vol. 40(1), pages 105-124, March.
    5. Cho, D Chinhyung & Eun, Cheol S & Senbet, Lemma W, 1986. "International Arbitrage Pricing Theory: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 41(2), pages 313-329, June.
    6. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," The Review of Financial Studies, Society for Financial Studies, vol. 8(3), pages 773-816.
    7. Andrei Shleifer & Lawrence H. Summers, 1988. "Breach of Trust in Hostile Takeovers," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 33-68, National Bureau of Economic Research, Inc.
    8. J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989. "The Size and Incidence of the Losses from Noise Trading," Journal of Finance, American Finance Association, vol. 44(3), pages 681-696, July.
    9. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Market Development and Financial Intermediaries: Stylized Facts," The World Bank Economic Review, World Bank, vol. 10(2), pages 291-321, May.
    10. Campbell, John Y & Hamao, Yasushi, 1992. "Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration," Journal of Finance, American Finance Association, vol. 47(1), pages 43-69, March.
    11. Campbell, J.Y. & Hamao, Y., 1988. "Predictable Bond And Stock Returns In The United States And Japan: A Study Of Long-Term Market Integration," Papers 100, Princeton, Department of Economics - Financial Research Center.
    12. repec:bla:jfinan:v:44:y:1989:i:5:p:1115-53 is not listed on IDEAS
    13. Connor, Gregory & Korajczyk, Robert A., 1986. "Performance measurement with the arbitrage pricing theory : A new framework for analysis," Journal of Financial Economics, Elsevier, vol. 15(3), pages 373-394, March.
    14. Alan J. Auerbach, 1988. "Corporate Takeovers: Causes and Consequences," NBER Books, National Bureau of Economic Research, Inc, number auer88-1.
    15. Stehle, Richard E, 1977. "An Empirical Test of the Alternative Hypotheses of National and International Pricing of Risky Assets," Journal of Finance, American Finance Association, vol. 32(2), pages 493-502, May.
    16. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    17. Devereux, Michael B & Smith, Gregor W, 1994. "International Risk Sharing and Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 535-550, August.
    18. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1990. "The Stock Market and Investment: Is the Market a Sideshow?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 157-216.
    19. Solnik, B H, 1974. "The International Pricing of Risk: An Empirical Investigation of the World Capital Market Structure," Journal of Finance, American Finance Association, vol. 29(2), pages 365-378, May.
    20. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 1996. "Financial constraints, uses of funds, and firm growth : an international comparison," Policy Research Working Paper Series 1671, The World Bank.
    21. Korajczyk, Robert A, 1996. "A Measure of Stock Market Integration for Developed and Emerging Markets," The World Bank Economic Review, World Bank, vol. 10(2), pages 267-289, May.
    22. Demirguc-Kunt, Asli & Maksimovic, Vojislav, 1995. "Stock market development and firm financing choices," Policy Research Working Paper Series 1461, The World Bank.
    23. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
    24. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    25. repec:bla:jfinan:v:44:y:1989:i:4:p:849-69 is not listed on IDEAS
    26. Gregory Connor and Robert A. Korajczyk., 1987. "Estimating Pervasive Economic Factors with Missing Observations," Research Program in Finance Working Papers 173, University of California at Berkeley.
    27. Levine, Ross, 1991. "Stock Markets, Growth, and Tax Policy," Journal of Finance, American Finance Association, vol. 46(4), pages 1445-1465, September.
    28. Errunza, Vihang & Losq, Etienne & Padmanabhan, Prasad, 1992. "Tests of integration, mild segmentation and segmentation hypotheses," Journal of Banking & Finance, Elsevier, vol. 16(5), pages 949-972, September.
    29. Bencivenga Valerie R. & Smith Bruce D. & Starr Ross M., 1995. "Transactions Costs, Technological Choice, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 67(1), pages 153-177, October.
    30. Wheatley, Simon, 1988. "Some tests of international equity integration," Journal of Financial Economics, Elsevier, vol. 21(2), pages 177-212, September.
    31. Ferson, Wayne E & Harvey, Campbell R, 1993. "The Risk and Predictability of International Equity Returns," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 527-566.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    2. Castaneda, Gonzalo, 2006. "Economic growth and concentrated ownership in stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 59(2), pages 249-286, February.
    3. Levine, Ross & Zervos, Sara, 1996. "Stock Market Development and Long-Run Growth," The World Bank Economic Review, World Bank, vol. 10(2), pages 323-339, May.
    4. Heston, Steven L. & Rouwenhorst, K. Geert & Wessels, Roberto E., 1995. "The structure of international stock returns and the integration of capital markets," Journal of Empirical Finance, Elsevier, vol. 2(3), pages 173-197, September.
    5. Bekaert, Geert & Harvey, Campbell R. & Lumsdaine, Robin L., 2002. "Dating the integration of world equity markets," Journal of Financial Economics, Elsevier, vol. 65(2), pages 203-247, August.
    6. Chaieb, Ines & Errunza, Vihang, 2007. "International asset pricing under segmentation and PPP deviations," Journal of Financial Economics, Elsevier, vol. 86(2), pages 543-578, November.
    7. Valeriano F. García & Lin Liu, 1999. "Macroeconomic Determinants of Stock Market Development," Journal of Applied Economics, Universidad del CEMA, vol. 2, pages 29-59, May.
    8. Alotaibi, Abdullah R. & Mishra, Anil V., 2017. "Time varying international financial integration for GCC stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 66-78.
    9. A., Rjumohan, 2019. "Stock Markets: An Overview and A Literature Review," MPRA Paper 101855, University Library of Munich, Germany.
    10. Salvatore Capasso, 2006. "Stock Market Development and Economic Growth," WIDER Working Paper Series RP2006-102, World Institute for Development Economic Research (UNU-WIDER).
    11. Hondroyiannis, George & Lolos, Sarantis & Papapetrou, Evangelia, 2005. "Financial markets and economic growth in Greece, 1986-1999," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(2), pages 173-188, April.
    12. Steven Heston & K. Rouwenhorst & Roberto Wessels, 2008. "The Role of Beta and Size in the Cross-Section of European Stock Returns," Yale School of Management Working Papers ysm86, Yale School of Management.
    13. Ross Levine, 1997. "Napoleon, Bourses, and Growth in Latin America," Research Department Publications 4106, Inter-American Development Bank, Research Department.
    14. Yohane Khamfula, 2005. "African capital markets and real sector investment," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(4), pages 511-525.
    15. Rene M. Stulz, 1994. "International Portfolio Choice and Asset Pricing: An Integrative Survey," NBER Working Papers 4645, National Bureau of Economic Research, Inc.
    16. Guangdong Xu, 2022. "From financial structure to economic growth: Theory, evidence and challenges," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(1), February.
    17. Kearney, Colm & Lucey, Brian M., 2004. "International equity market integration: Theory, evidence and implications," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 571-583.
    18. Keith Blackburn & Niloy Bose & Salvatore Capasso, 2005. "Financial Development, Financing Choice and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 9(2), pages 135-149, May.
    19. Steven L. Heston & K. Geert Rouwenhorst & Roberto E. Wessels, 1999. "The Role of Beta and Size in the Cross‐Section of European Stock Returns," European Financial Management, European Financial Management Association, vol. 5(1), pages 9-27, March.
    20. Ross Levine, 1997. "Napoleón, bolsas y crecimiento en América Latina," Research Department Publications 4107, Inter-American Development Bank, Research Department.

    More about this item

    Keywords

    Economic Theory & Research; Investment and Investment Climate; Industrial Economics; Capital Markets and Capital Flows; Securities Markets Policy & Regulation; Capital Flows; Economic Growth; Crime and Society;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1622. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.