FINANCIAL LIBERALIZATION AND STOCK MARKET EFFICIENCY: MEASURING THE THRESHOLD EFFECTS OF GOVERNANCE

Navaz Naghavi, Muhammad Shujaat Mubarik and Devinder Kaur
Additional contact information
Navaz Naghavi: Taylor’s Business School, Taylor’s University, Lakeside Campus, No 1. Jalan Taylors, 47500, Subang Jaya, Selangor, Malaysia
Muhammad Shujaat Mubarik: Faculty of Business Administration, Mohammad Ali Jinnah University, 22E Block 6 PECHS, Karachi Pakistan
Devinder Kaur: Faculty of Business & Management, Asia Pacific University of Technology & Innovation (APU), Technology Park Malaysia, Bukit Jalil, 57000, Kuala Lumpur, Malaysia

Annals of Financial Economics (AFE), 2018, vol. 13, issue 04, 1-24

Abstract: This study takes the initiative to make a link between empirical aspect of an economy and theoretical part of it. Investigating econometric findings, the current study has taken advantages of profound analytical discussions to justify which school of thought describe liberalization phenomena and its relevant side effects. This paper presents an investigation into the effects of financial openness on stock market efficiency in emerging markets after controlling for certain level of institutional development. The results demonstrate that there is a threshold effect in the liberalization–efficiency relationship. Specifically, we found that the impact of financial liberalization on informational efficiency of the stock market was positive and significant only after a certain threshold level of institutional development had been attained. Below this level, the effect of financial liberalization on stock market efficiency was negative. This finding suggests that the positive effects of financial liberalization on informational efficiency are contingent on the level of institutional development, thus supporting the idea that financial liberalization embedded within a sound institutional framework has the capacity to enhance stock market efficiency. The conclusion that the governance concept, emphasized in econometric findings, is implicit in the definition of neoliberalism can be considered as one of the contributions of the study.

Keywords: Threshold model; financial liberalization; institutional development; stock market efficiency (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010495218500161
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:afexxx:v:13:y:2018:i:04:n:s2010495218500161

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010495218500161

Access Statistics for this article

Annals of Financial Economics (AFE) is currently edited by Michael McAleer

More articles in Annals of Financial Economics (AFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().