Political uncertainty and stock market liquidity, size, and transaction cost: The role of institutional quality
Kwabi, Frank Obenpong, Adegbite, Emmanuel, Ezeani, Ernest, Wonu, Chizindu, and Mumbi, Henry (2024) Political uncertainty and stock market liquidity, size, and transaction cost: The role of institutional quality. International Journal of Finance & Economics, 29 (2). pp. 2030-2048.
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Abstract
Using panel data of 42 countries from 2001 to 2019, we examine whether political uncertainty (caused by uncertainty about national elections) explains variations in cross-country liquidity, market size, and transaction cost. We also investigate whether institutional quality moderates the negative effects of political uncertainty on stock market development. We show that political uncertainty reduces stock market size, liquidity, and increases transaction costs. Our results indicate that institutional quality moderates the negative effects of political uncertainty on stock market development. However, we find no effects in emerging markets arising from the high prevalence of weak institutions. We confirm the robustness of our findings using alternative financial development measures and endogeneity. This study enhances our understanding of the salient role of political uncertainty in the development of the stock market, with important implications for market regulators, corporations, and investors.
| Item ID: | 78028 |
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| Item Type: | Article (Research - C1) |
| ISSN: | 1099-1158 |
| Keywords: | institutional quality, political uncertainty, stock market development |
| Copyright Information: | © 2023 The Authors. International Journal of Finance & Economics published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made. |
| Date Deposited: | 25 May 2023 06:04 |
| FoR Codes: | 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3501 Accounting, auditing and accountability > 350199 Accounting, auditing and accountability not elsewhere classified @ 100% |
| SEO Codes: | 23 LAW, POLITICS AND COMMUNITY SERVICES > 2302 Government and politics > 230203 Political systems @ 100% |
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