Institutions, microeconomic factors and stock market capitalization: Evidence from the EAP countries

Abstract: The purpose of this study was to examine the influence of institutions and macroeconomic factors on the capitalization of securities in East Asian and Pacific countries (EAP). A balanced panel data is used to collect time-series from 2008 to 2018 in 11 EAP countries and to analyze the impacts of institutions, macroeconomics and stock market capitalization by the general moment method (GMM). Instead of measuring in detail each aspect of the institution as in previous studies, the six institutional aspects as defined by Kaufmann et al. (2011) [Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The worldwide governance indicators: methodology and analytical issues. Hague Journal on the Rule of Law, 3(2), 220-246.] were calculated into one institutional variable. The institutional variables in this article were measured to ensure a more logical and consistent way of institutional influence on stock capitalization. The results indicate that, the institutions and macroeconomic factors were significant in forecasting the stock market capitalization size. Institutional, economic growth and savings had positive effects, macroeconomic factors such as inflation and high interest rates had a negative impact on stock capitalization in EAP countries. The institutions and macroeconomic factors had a significant impact on stock capitalization in EAP countries, the majority of developed markets had better institutions, better control of inflation and interest rates, and most undeveloped markets had higher economic growth and domestic savings.

How to cite this paper

 Phuong, L. (2020). Institutions, microeconomic factors and stock market capitalization: Evidence from the EAP countries.Accounting, 6(5), 817-824.

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