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Capital accumulation in less developed countries : Does stock market matter

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Frame of Image  in Less Developed Countries: Does Stock Market Matter?
Prabirjit Sarkar Centre for Business Research, Judge Business School Building, University of Cambridge, Cambridge, CB2 1AG, United Kingdom and Jadavpur University, Kolkata, India Email: prabirjitsarkar@gmail.com
Abstract
Our panel data analysis (1988-2002) of a sample of 31 less developed countries (LDCs) shows that the stock market capitalization as a percentage of GDP- an important indicator of stock market development- has no relationship with the growth rates of gross fixed capital formation (GGKF). Our time series analysis (1976-2002) of 16 LDCs shows that in 11 cases there is no meaningful relationship between the stock market turnover ratio and the growth of capital accumulation (GGKF). For 5 LDCs (belonging to the so-called French-origin civil law category) with low shareholder protection we get a positive long-term relationship.
Key words: stock market, capital accumulation, growth, and liberalisation JEL CODES: F3, G00, O16
I. Introduction
In the present era of financial liberalisation under the aegis of the three pillars of the Britton Woods system (IMF, World Bank and WTO) stock market development has been an important part of both internal and external financial liberalisation in the less development countries (LDCs). There is now a call for better corporate governance in order to protect the interests of the shareholders leading to stock market developments and capital accumulation. In a wellknown paper La


Full Text
Title Capital accumulation in less developed countries
Similar Titles
Sub Title

Does stock market matter

Material Type Reports
Author(English)

Sarkar, Prabirjit

Publisher

CBR, University of Cambridge

Date 2007-07
Pages 22
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic System
Economy < Direct Investment

Abstract

Our panel data analysis (1988-2002) of a sample of 31 less developed countries (LDCs) shows that the stock market capitalization as a percentage of GDP- an important indicator of stock market development- has no relationship with the growth rates of gross fixed capital formation (GGKF). Our time series analysis (1976-2002) of 16 LDCs shows that in 11 cases there is no meaningful relationship between the stock market turnover ratio and the growth of capital accumulation (GGKF). For 5 LDCs (belonging to the so-called French-origin civil law category) with low shareholder protection we get a positive long-term relationship.