Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.574496
Title: A new way of defining and classifying stock market development
Author: Kamugisha, Gration Gervase
Awarding Body: University of Leeds
Current Institution: University of Leeds
Date of Award: 2011
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Abstract:
This thesis explores the meaning and measures of market development theory. Unlike abundant previous studies that approach the stock market development concept as homogeneous, this work asserts that stock market development has multiple meanings depending upon the perspective of user groups. Accordingly, the study defines the stock market development concept from the international institutional investors' and governments' perspectives. The thesis identifies empirically the factors that influence the current stock market classification by practitioners, namely S&P's, FTSE and MSCI, as developed or emerging. In addition, cut-off points are suggested to distinguish developed markets from emerging markets. The results show that there are in fact three main segments in the development path of a stock market, namely developed markets (top), emerging markets (middle) and another segment comprising stock markets that are below the emerging markets (bottom). The last group may also be labelled 'pre-emerging'. Measures of stock market development from both the international institutional investors' and governments' perspectives are applied to achieve two objectives. First, to test claims or theories asserted on the basis of previous measures of stock market development in the literature, which are considered generally weaker than the measures constructed in this thesis. Secondly, to investigate the scenarios in which the interests of international institutional investors converge or diverge with those of governments, and the reasons for such convergence or divergence. The results obtained from the investigation above confirm, modify or differ with previous claims as follows: First, results confirm the proposition that stock market development is negatively related to ownership concentration, conditional on investor protection quality (La Porta et al., 1997, 1998). Second, this work builds on a claim that stock market development is inversely related to dividend yield, conditional on governance quality and cost of capital, as suggested by La Porta et al. (2002) and Henry (2003) respectively by showing that not all perspectives conform to these relations. Third, this work not only confirms, but also extends Demirguc-Kunt and Maksimovic's (1996) claim that stock market growth favours equity financing over debt financing in more developed markets and that the opposite is true in under- developed stock markets. Fourth, Morck et al.'s (2000) proposition that stock market returns in under-developed markets tend to move together more than in developed markets is re-visited and re-interpreted. Fifth, this thesis confirms the existence of divergent and convergent interests 11 .> , ABSTRACT among equity market stakeholders. This finding extends and confirms the 'interest group theory' suggested by Rajan and Zingales (2003). And sixth, this study, like Spamann (2005, 2010) reports that the original anti-director rights index from La Porta et al. (1998) and the revised anti-director rights index from Djankov et al. (2008) are not good predictors of ownership concentration. Interestingly, the stock market development indices developed in this research are found to associate better with ownership concentration than both previous indices in the literature and anti-director rights indices. This thesis concludes that clear understanding of the meaning and measures of the stock market development concept may improve investment, policy and regulatory decisions globally. Specifically, this understanding among policy makers and academicians can help to prevent or reduce the potential for future financial crises. III
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.574496  DOI: Not available
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