Exploring the stock market development and sustainable development nexus: insights from emerging market economies

Yilmaz Bayar, Valentin Toader, Marius Dan Gavriletea and Oguzhan Yelkesen

International Journal of Islamic and Middle Eastern Finance and Management, 2024, vol. 17, issue 6, 1213-1231

Abstract: Purpose - Sustainable development is considered a key factor in addressing environmental issues, global inequalities and poverty. This study aims to investigate the impact of stock market indicators on sustainable development across 16 emerging markets from 2003 to 2020. Design/methodology/approach - The research uses causality and cointegration analyses to explore the relationships between stock market indicators and sustainable development. Findings - Univariate causality analysis reveals a bidirectional causal relationship between the stock market turnover ratio and sustainable development, as well as a unidirectional relationship from sustainable development to stock market capitalization and total value traded. Panel-level cointegration analysis suggests that only stock market capitalization has a weak positive influence on sustainable development. However, the impact of stock market indicators on sustainable development varies significantly among countries, as revealed by country-level cointegration analysis. Research limitations/implications - While this study provides valuable insights, it is not without limitations. The findings are limited to the selected emerging markets and the specified timeframe (2003–2020). The complexity of factors influencing sustainable development suggests the need for further exploration in diverse contexts. Practical implications - Understanding the nuanced relationships between stock market indicators and sustainable development can offer valuable insights for policymakers, investors and stakeholders. Originality/value - This research contributes to the existing literature by examining the multifaceted connections between stock market indicators and sustainable development, focusing on country-specific causality relationships. The study highlights the reciprocal nature of this relationship, where financial market development can both influence and be influenced by a country's progress toward sustainability. This approach provides a more nuanced understanding of the complex interaction between stock market maturity and sustainability goals.

Keywords: Stock market development; Sustainable development; Causality analysis; Cointegration analysis (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-03-2024-0136

DOI: 10.1108/IMEFM-03-2024-0136

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