Investor Protection and Stock Market Growth: The Effect of Coalition Governments on Enforcement of Shareholder Rights in Central and Eastern European Countries Open Access

Abstract

Since the fall of the Soviet Union, countries in Central and Eastern Europe have experienced wide variation in the development of their financial markets. This paper aims to provide a domestic political institutions approach to explaining variation in stock market growth across thirteen countries in the region. I study the relationship between the number of veto players - collective actors necessary to produce policy change - and the size of a country's stock market. I hypothesize that a high number of veto players reduces investor confidence. Using case studies from Latvia, Estonia, Romania, and Slovakia, my research provides qualitative evidence that more veto players correlates with low stock market capitalization as a percent of a country's GDP.

Table of Contents

Section Pages

Introduction 1-5

Figure 1: Average Stock Market Capitalization across CEE countries 5

Figure 2: Average Veto Players 5

Background and Theory 6-8

Literature Review 9-11

Research Design 11-15

Case Studies

Latvia 15-27

Figure 3: Veto Players and Market Capitalization in Latvia (2000-2005 and 2009-2012) 17

Table 1: Veto Players and Market Capitalization in Latvia (2002-2012) 17

Estonia 27-34

Figure 4: Veto Players and Market Capitalization in Estonia (2000-2005 and 2009-2012) 29

Table 2: Veto Players and Market Capitalization (1999-2012) 29

Romania 34-44

Figure 5: Veto Players and Market Capitalization in Romania (2000-2005 and 2009-2012) 35

Table 3: Market Capitalization (1997-2012) 35

Slovakia 44-50

Figure 6: Veto Players and Market Capitalization in Slovakia (2000-2005 and 2009-2012) 46

Table 4: Market capitalization (1998-2012) 46

Conclusion and Implications 51-54

Figure 7: Average Market Capitalization as Function of Veto Players 54

Figure 8: Average Market Capitalization as Function of Veto Players (excluding Bulgaria and Macedonia) 55

Works Cited 56-60

About this Honors Thesis

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School	Emory College
Department	International Studies
Degree	BA
Submission	Honors Thesis
Language	English
Research Field	Political Science, General
Keyword	stock markets Central and Eastern Europe Investor protection coalition governments
Committee Chair / Thesis Advisor	Reinhardt, Eric, Emory University
Committee Members	Tworzecki, Hubert, Emory University Velikonja, Urska , Emory University Schmidt, Breno, Emory University Carrubba, Clifford, Emory University

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