Democracy and market crashes: Evidence from a worldwide panel of countries

Nicholas Apergis ()

Finance Research Letters, 2017, vol. 22, issue C, 244-248

Abstract: This paper investigates the role of democracy for predicting market crashes. A panel regression specification attempts to unravel the impact of democracy on the skewness of the American Depositary Receipts (ADRs). The analysis uses an approach that accounts for the effect of democracy on the manner financial market crashes are endogenously determined by market structures. The results provide strong supportive evidence that countries with stronger democratic regimes experience higher positive skewness in asset returns, indicating less likelihood of market crashes.

Keywords: Democracy; Market crashes; American Depositary Receipts; Panel data analysis; 56 countries (search for similar items in EconPapers)
JEL-codes: D02 G01 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:22:y:2017:i:c:p:244-248

DOI: 10.1016/j.frl.2016.12.014

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