Publication: Enhancing the Efficiency of Securities Markets in East Asia
Loading...
Published
2007-02
ISSN
Date
2012-06-05
Author(s)
Editor(s)
Abstract
The authors explore the relative efficiency of stock markets across countries using newly available data on transactions costs and the quality of the informational environment of stock markets. These new measures are constructed from firm-level stock returns in a panel of 60 countries for the period 2000-04. The authors then develop a framework to understand the linkages between efficiency, liquidity, and their determinants. To give empirical content to the framework, they study the determinants of transactions costs and the quality of the informational environment. They find that some institutional arrangements-such as the availability of stock lending and short selling-and the openness of markets are associated with lower transactions costs. The authors also find that, although disclosure rules for directors and officers of listed firms are essential, the ability of shareholders to seek redress is more conducive to a better informational environment in stock markets. This in turn serves as the basis for the policy framework and recommendations for the East Asian region. In particular, the region needs to continue to strengthen the implementation and enforcement of corporate governance, to further enhance the market and institutional infrastructure, and focus on policy measures to foster a larger and more diversified investor base to continue to see gains in the efficiency of stock markets.
Link to Data Set
Citation
“Ghosh, Swati; Revilla, Ernesto. 2007. Enhancing the Efficiency of Securities Markets in East Asia. Policy Research Working Paper; No. 4129. © World Bank. http://hdl.handle.net/10986/7134 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Stanley Fischer Memorial Lecture: Geopolitics and Development—The World Bank ABCDE Conference(Washington, DC: World Bank, 2025-10-01)This paper provides a sweeping historical overview of how geopolitics has shaped economic development and global institutions, culminating in a forward-looking analysis of challenges facing the world in 2025. The paper argues that understanding economic history and the political economy is essential for effective policy making, as geopolitics—encompassing power politics, geography, security, and ecology—fundamentally influences development economics. It traces the dynamic interplay between geopolitics and development across major historical periods: from the European Age of Discovery and the rise of nation-states, through the world wars and the Bretton Woods era, to the Cold War and the age of globalization. It highlights how crises and conflicts have repeatedly transformed global economic systems, spurring new ideas and institutions. Looking ahead, the paper identifies key trends for 2025—fragmented global governance amid ongoing globalization (migration, climate change, and debt), shifting security contexts with territorial disputes and nuclear risks, and the intersection of energy, climate, demographics, and migration with development—as it predicts increased economic nationalism and regionalization in finance and trade. The paper concludes by emphasizing the adaptive role of multilateral institutions like the World Bank and the International Monetary Fund, advocating for a holistic approach to development economics that integrates political and economic institutions, governance, and both macro and micro markets.Publication Gender Gaps in the Performance of Small Firms: Evidence from Urban Peru(Washington, DC: World Bank, 2025-09-23)This paper estimates the gender gap in the performance of firms in Peru using representative data on both formal and informal firms. On average, informal female-led firms have lower sales, labor productivity, and profits compared to their male-led counterparts, with differences more pronounced when controlling for observable determinants of firm performance. However, gender gaps are only significant at the bottom of the performance distribution of informal firms, and these gaps disappear at the top of the distribution of informal firms and for formal firms. Possible explanations for the performance gaps at the bottom of the distribution include the higher likelihood of small, female-led firms being home-based, which is linked to lower profits, and their concentration in less profitable sectors. The paper provides suggestive evidence that household responsibilities play a key role in explaining the gender gap in firm performance among informal firms. Therefore, policies that promote access to care services or foster a more equal distribution of household activities may reduce gender productivity gaps and allow for a more efficient allocation of resources.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication East Asian Finance : The Road to Robust Markets(Washington, DC: World Bank, 2006)This study analyzes the key issues and constraints - in terms of efficiency, access and safety and soundness - faced by East Asian countries in developing their financial markets which are at different stages of development, drawing on global experience. The study takes stock of the initiatives being undertaken at the regional level to foster greater financial integration as a means of deepening and diversifying financial markets, and on the policy issues that need to be addressed at the domestic level to deepen and diversify financial markets and to actually benefit from the actions that are being taken at the regional level.Publication How the Macroeconomic Environment and Investment Climate Have Affected the Manufacturing Sector(World Bank, Jakarta, 2012-09)The performance of Indonesia's manufacturing sector has lagged over the past decade. This is seen in the decline in growth after the Asian financial crisis, by the sector's decline relative to other sectors within the economy, and relative to countries in the region. This note documents the effects of the challenging macro and external environment on the profits of manufacturing firms, and on the uncertainty they face, and argues that these adverse conditions partially explain the stagnation of the sector in the past decade. The changes in incentives appear to have particularly affected labor-intensive sectors, with important consequences for job creation. Policies to promote growth in the manufacturing sector should aim at alleviating pressures on manufacturing costs by: (i) reducing rigidities in the market for labor; (ii) promoting competition in the market for services; and (iii) providing incentives for productivity enhancing technology adoption, while reducing profit uncertainty by; (iv) maintaining a low and predictable rate of inflation; and (v) keeping exchange rate volatility within reasonable limits.Publication Comparing European and U.S. Securities Regulations : MiFID versus Corresponding U.S. Regulations(Washington, DC: World Bank, 2010)The purpose of this paper is to compare the European Union (EU) and United States (U.S.) securities regulations. In November 2007, the market in financial instruments directive 2004/39/EC (MiFID) came into force in the EU, and brought about deep changes in the market infrastructure. The same year regulations National Market System (NMS) in the U.S. was fully enacted and reformed equities markets. This study compares MiFID with the corresponding U.S. regulations, and primarily focuses on the regulatory and supervisory framework, trading venues, and the provision of investment services. Implementation of the rules enforcement and right to redress are beyond the scope of this paper. Likewise, the paper does not intend to judge the effectiveness of the two regulatory systems.Publication Banking Flows and Financial Crisis : Financial Interconnectedness and Basel III Effects(2011-08-01)This paper examines the factors that determine banking flows from advanced economies to emerging markets. In addition to the usual determinants of capital flows in terms of global push and local pull factors, it examines the role of bilateral factors, such as growth differentials and economic size, as well as contagion factors and measures of the depth in financial interconnectedness between lenders and borrowers. The analysis finds profound differences across regions. In particular, in spite of the severe impact of the global financial crisis, banking flows in emerging Europe stand out as a more stable region than is the case in other developing regions. Assuming that the determinants of banking flows remain unchanged in the presence of structural changes, the authors use these results to explore the short-term implications of Basel III capital regulations on banking flows to emerging markets.Publication China Capital Markets Development Report : China Securities Regulation Commission(China Financial Publishing House, 2008-01)The 'China capital markets development report' provides a good overview of the development of China's capital markets and explores future strategies. The report starts by reviewing historical events in the evolution of China's capital markets which have grown from small and unorganized regional markets into a national market today. By summarizing lessons learned during the market evolution and analyzing major gaps between China's capital markets and more mature markets, the report tries to propose a strategic design and vision for China's capital markets development for the next decade and beyond. Since the commencement of economic reform and opening up, China has gone through significant economic and social changes, and the socialist market economic regime has been established and steadily improved. Between 1979 and 2007, China's Gross Domestic Product (GDP) has been growing above 9 percent annually on average and China has become the fourth largest economy in the World. China's capital markets emerged and developed during the same period. With joint efforts by all relevant parties, China's capital markets have been able to reach a level of development that took many mature markets decades or even a hundred years to achieve. Along the way, the legal and regulatory frameworks, and trading and clearing systems have developed according to international best practice and China's capital markets have been increasingly recognized by international investors. The emergence and development of capital markets has been closely linked to mass production. They are the prerequisite for, and important indicators of, a modern market economy. Capital markets promote the development and improvement of market-driven resource allocation, resulting in the optimization of social resources. As the world financial markets become increasingly global and integrated, competition among capital markets and financial centers around the world is becoming increasingly intensive, leading to a fast-changing landscape in capital markets. The competitiveness and viability of the capital markets have become important components of national competitiveness.
Users also downloaded
Showing related downloaded files
Publication Breaking the Conflict Trap : Civil War and Development Policy(Washington, DC: World Bank and Oxford University Press, 2003)Most wars are now civil wars. Even though international wars attract enormous global attention, they have become infrequent and brief. Civil wars usually attract less attention, but they have become increasingly common and typically go on for years. This report argues that civil war is now an important issue for development. War retards development, but conversely, development retards war. This double causation gives rise to virtuous and vicious circles. Where development succeeds, countries become progressively safer from violent conflict, making subsequent development easier. Where development fails, countries are at high risk of becoming caught in a conflict trap in which war wrecks the economy and increases the risk of further war. The global incidence of civil war is high because the international community has done little to avert it. Inertia is rooted in two beliefs: that we can safely 'let them fight it out among themselves' and that 'nothing can be done' because civil war is driven by ancestral ethnic and religious hatreds. The purpose of this report is to challenge these beliefs.Publication Government Matters III : Governance Indicators for 1996-2002(World Bank, Washington, DC, 2003-08)The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.Publication Design Thinking for Social Innovation(2010-07)Designers have traditionally focused on enchancing the look and functionality of products.Publication Governance Matters IV : Governance Indicators for 1996-2004(World Bank, Washington, DC, 2005-06)The authors present the latest update of their aggregate governance indicators, together with new analysis of several issues related to the use of these measures. The governance indicators measure the following six dimensions of governance: (1) voice and accountability; (2) political instability and violence; (3) government effectiveness; (4) regulatory quality; (5) rule of law, and (6) control of corruption. They cover 209 countries and territories for 1996, 1998, 2000, 2002, and 2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 organizations. The authors present estimates of the six dimensions of governance for each period, as well as margins of error capturing the range of likely values for each country. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors give examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. The authors also analyze in detail changes over time in their estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for aggregate indicators than for any individual indicator. While the authors find that the quality of governance in a number of countries has changed significantly (in both directions), they also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, they interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low-income countries.Publication Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008(2009-06-01)This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.