Institutional determinants of emerging market returns and flows

Ralph Sonenshine and Bradley O. Erickson

Emerging Markets Review, 2022, vol. 51, issue PB

Abstract: Investors commonly rely on macroeconomic variables to drive capital allocation decisions. But other institutional factors may alter investor returns as well, particularly in emerging market countries. Given these concerns, this paper examines the effects of institutional factors—specifically democracy, transparency and corruption—on emerging market equity returns and flows. We find that institutional quality impacts stock market returns and flows in emerging markets where corruption, transparency, and democracy levels are below average. We also find that government-owned or controlled industries are positively impacted by a deterioration in the corruption and democracy indexes, while highly concentrated sectors, like the financial industry, are negatively impacted by improving transparency.

Keywords: Returns; Corruption; Transparency; Democracy; Emerging markets (search for similar items in EconPapers)
JEL-codes: G11 G15 G18 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:51:y:2022:i:pb:s156601412200005x

DOI: 10.1016/j.ememar.2022.100888

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