Capital Control Liberalization and Stock Market Development

48 Pages Posted: 20 Apr 2016

Date Written: July 31, 1996

Abstract

The authors address two questions: What happens to stock market size, liquidity, volatility, and integration with world capital markets after capital controls are liberalized? And what is the relationship between those indicators of stock market development and regulations about information disclosure, accounting standards, and investor protection? An analysis of data on stock markets in 16 developing countries suggests the following: a) stock markets become larger, more liquid, more integrated internationally, and more volatile after controls on capital and dividend flows are liberalized; b) easy access to information about firms is positively associated with the size and liquidity of stock markets; and c) countries that officially establish internationally accepted accounting standards and laws to protect investors do not have substantially better- functioning stock markets than countries that do not adopt those official standards.

Keywords: Health Economics & Finance, Access to Markets, Economic Theory & Research, Banks & Banking Reform, Markets and Market Access, International Terrorism & Counterterrorism

Suggested Citation

Belli, Paolo, Capital Control Liberalization and Stock Market Development (July 31, 1996). World Bank Policy Research Working Paper No. 1622. Available at SSRN: https://ssrn.com/abstract=632643

Paolo Belli (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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