Information Transmission and Micro-structure rents in Emerging Markets

Hammad Siddiqi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper offers a first ever theoretical study of a unique financing instrument associated with prominent emerging equity markets in South Asia. The instrument known as badla, in local parlance, has two interesting aspects, which have been ignored thus far. Firstly, it may serve as an information transmission mechanism and can be thought of as an institutional response to information gaps in the emerging markets. Secondly, it creates new types of rents, called “market microstructure” rents for certain market players. These rents are then exploited to gain control of the governing boards of equity markets. Consequently, institutional inertia is created which hinders the badly needed reform process.

Keywords: Information transmission; Signaling; Microstructure rents; Linked games; Institutional inertia (search for similar items in EconPapers)
JEL-codes: D02 D80 G10 K42 (search for similar items in EconPapers)
Date: 2009-02-10
New Economics Papers: this item is included in nep-cta
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