Institutional Voids in Financial Markets of

Transcript:Institutional Voids in Financial Markets of:
Institutional Voids in Financial Markets of Emerging Economies Abdul Qadir Shah BADM 504 Introduction What are emerging economies/markets? “Emerging economies are low-income, rapid-growth countries using economic liberalization as their primary engine of growth” - (Hoskisson et al., 2000). Palepu and Khanna (1997) defined emerging economies from the perspective of absence or under-development of institutions. Both schools of thoughts have given primary focus to institutions. Introduction Like all other institutions, financial markets in emerging economies have institutional voids. There is a lack of or underdeveloped banking system, under-writers, brokerage firms, bond markets, auditors, rating agencies, and other financial intermediaries. Absence or underdevelopment of financial institutions and markets have profound implications for financial performance of business firms. Research Question Does Lack of financial institutions substantively and significantly impact the profitable growth of business firms in emerging markets? Method and Sampling A systematic review of the literature, qualitative and empirical, on the topic. The field of emerging markets, especially institutional voids is relatively new and evolving. There is lack of specific literature related to voids in financial markets of emerging economies. Key Words and Selection of Articles The following key words were use: Financial Institutions; Institutional Voids; Financial Constraints; Emerging Markets; Profitable Growth of Firms. In the academic search engines of JSTOR, Emerald, Science, Direct, Harvard Business Publishing, and Google Scholar used for research of relevant literature. Inclusion and Exclusion Criteria As the literature is scare on the topic, the following inclusion and exclusion criteria was applied, Inclusion Criteria - All papers that addressed lack, void, absence, or under-developed of financial and capital markets and institutions in emerging markets (regardless of citations and time period). - All papers were included regardless of qualitative or quantitative approach. - All or any emerging markets were studies, those paper were included. Exclusion Criteria - Papers that addressed financial and capital markets and institutions but did not address the financial impact on firms. - Papers that did not address the topic explicitly in emerging markets. Journals and Articles Journals and Articles Results and Analysis - Themes Business Groups - Business groups serve as financial institutions’ alternatives. - Firms with business group affiliations are saved from negative financial implications. - Governments in EMs need to nurture financial institutions in order to facilitate individual firms. Information Asymmetry - Due to absence of credible financial information, firms, especially individual firms are at greater risk of bad choice, pulling out of