The Determinants of Stock Market Development and Liquidity in Capital Markets

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Author(s): Sarah Newton (University of Kent, UK)and Ingrid O'Connor (University of Cardiff, UK)
Copyright: 2017
Pages: 15
Source title: Value Relevance of Accounting Information in Capital Markets
Source Author(s)/Editor(s): Marianne Ojo (George Mason University, USA)and Jeanette Van Akkeren (QUT School of Accountancy, Australia)
DOI: 10.4018/978-1-5225-1900-3.ch010

Keywords: Accounting & Finance / Accounting and Finance / Business & Management / Business Science Reference

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Abstract

“At the early stages of its establishment the stock market is a complement rather than substitute for the banking sector. Developing the banking sector can promote stock market development as demonstrated by the experiences of many East Asian countries. However, when stock markets are sufficiently developed they tend to compete with the banking sector as shown by findings.” How does commercial banking impact investment activities in capital markets – and particularly developed capital markets? Is it true then that in certain economies, the banking sector serves as a complementary component of the financial system – up till a stage where it begins to compete with the securities sector? As well as investigating these observations, this chapter is aimed at investigating the validity of Efficient Markets Hypothesis and Efficient Capital Markets Hypothesis in emerging economies – as contrasted with advanced market economies. In so doing, it aims to contribute to the extant literature on stock market liquidity and liquidity in capital markets.

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