The Effect of Institutional Quality Components on  Stock Market Variables  (Selected Islamic and Non-Islamic Countries)

Shaghaghi, Firooz; Pakmaram, Asgar; Badavarnahandi, Younus

doi:10.22054/ijer.2020.37072.658

Document Type : Research Paper

Authors

¹ Ph.D. Student, Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran.

² Associate Professor, Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran

³ Associate Professor, Department of Accounting, Tabriz Branch, Islamic Azad University, Tabriz, Iran.

https://doi.org/10.22054/ijer.2020.37072.658

Abstract

Financial development is one of the main goals of economic policymakers to achieve sustainable economic growth. One of the important approaches to financial development is the expansion and deepening of the stock market. However, such expansion needs improvement of good governance, or institutional quality. Given the importance of this issue, the present study investigates the effect of institutional quality indicators (voice and accountability, political stability without violence, government effectiveness, regulatory quality, rule of law, and corruption control) on stock market variables by two Islamic countries group (10 countries) and non-Islamic countries (37 countries) during period from 2002 to 2016 using data panel method. The results showed that the institutional quality components plays an important role in the growth of stock prices relative to the growth of the average return on the whole economy as well as the increase in the volume of stock trading relative to the growth of the total turnover in both groups of countries. However, the impact of these components on the group of Islamic countries is far greater than that of non-Islamic countries. In addition, foreign direct investment, increasing real GDP at a constant price, and government final expenditure at constant price in both groups of countries have a significant impact on the growth of stock trading volumes and stock prices.

Keywords

Main Subjects

Stock market

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Iranian Journal of Economic Research

The Effect of Institutional Quality Components on Stock Market Variables (Selected Islamic and Non-Islamic Countries)

References

References

Volume 25, Issue 85 - Serial Number 85
February 2021
Pages 137-166

The Effect of Institutional Quality Components on Stock Market Variables (Selected Islamic and Non-Islamic Countries)

References

References

Volume 25, Issue 85 - Serial Number 85February 2021Pages 137-166

Volume 25, Issue 85 - Serial Number 85
February 2021
Pages 137-166