Capital control liberalization and stock market development

This paper addresses two questions. First and foremost, what happened to stock market size, liquidity, volatility, and international integration following capital control liberalization in 16 emerging market economies? Second, what is the empirical relationship between stock market size, liquidity, volatility, and international integration and regulations concerning information disclosure, accounting standards, and investor protection? We find that stock markets tend to become larger, more liquid, more volatile, and more integrated following the liberalization. In addition, countries with firms that widely disseminate comprehensive information have larger, more liquid, and more internationally integrated markets. (C) 1998 Elsevier Science Ltd. All rights reserved.