THE POWER OF GOVERNANCE: DO DEMOCRACY AND CORRUPTION MATTER FOR STOCK MARKET DEVELOPMENT IN EMERGING MARKETS?
DOI:
https://doi.org/10.60101/rmuttgber.2026.295542Keywords:
Stock market development, Democracy, Corruption, Emerging economies, Market capitalizationAbstract
This study examines how the Democracy Index and Corruption Perceptions Index, affects stock market capitalization in 24 emerging countries from 2006 to 2022. Using panel data regression, it investigates both the individual and combined impacts of democracy and corruption on market capitalization. The findings suggest that democracy is positively associated with stock market capitalization; however, this relationship is only weakly significant at the 10% level. In contrast, corruption does not exhibit a statistically significant direct effect. When considered jointly, democracy remains marginally significant, while corruption and its interaction with democracy are not statistically significant. Additionally, in high-income emerging markets, democracy play a crucial role in shaping market capitalization, whereas in other markets, neither exerts a meaningful effect. These results underscore the importance of democracy in driving financial market growth, particularly in wealthier economies.
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Copyright (c) 2026 Anucha Tilokwattanothai, Ravi Lonkani
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