Do institutional quality and capital account openness affect capital flow? Evidence from Asian bond markets
control of corruption; government effectiveness; local bond market; political stability; public governance; regulatory quality; rule of law; voice & accountability
Capital inflow into local bond markets helps countries with infrastructure financing, funding fiscal deficit, enhancing bond market liquidity, and diversifying investment portfolios globally. This study aims to assess the impact of institutional quality and capital account openness on capital inflow into Asian local bond markets for the period 20022023. For reflecting Asian bond markets, seven countries, namely, China, Malaysia, South Korea, Japan, the Philippines, Indonesia, and Thailand, have been considered. The rule of law, regulatory quality, control of corruption, voice & accountability, political stability, and government effectiveness indices are the various proxies considered in this study to measure the different aspects of institutional quality. Further, the Chinn-Ito index is employed to measure capital account openness. Fixed effect, random effect, and pooled data ordinary least squares are employed as different forms of panel data estimation methods in this study. Moreover, Breusch-Pagan LM and Hausman tests are performed to select the most efficient estimation method. This study reveals that the rule of law, regulatory quality, and control of corruption have a positive influence on capital inflow at a 5% significance level and political stability at a 1% significance level. In contrast, capital account openness has a negative impact at a 1% significance level. However, neither voice & accountability nor government effectiveness have a significant influence over capital inflow. These findings suggest improving the rule of law and regulatory quality, creating policies for political stability, stringent acts against corruption, and controlling capital account openness to encourage capital inflow into local bond markets. Swarupa Ranjan Panigrahi, Suresha B., Krishna T. A., Latha Ramesh, Nijumon K. John, 2025.
Panigrahi, Swarupa Ranjan; Suresha, B.; Krishna, T.A.; Ramesh, Latha; John, Nijumon K.
Investment Management and Financial Innovations;Volume;22;Issue;2;pp.155-168
https://doi.org/10.21511/imfi.22(2).2025.13 https://www.scopus.com/pages/publications/105003937176?origin=resultslist
Panigrahi S.R., School of Business and Management, Christ University, India; Suresha B., School of Business and Management, Christ University, India; Krishna T.A., Department of Professional Studies, School of Commerce, Finance and Accountancy, Christ University, India; Ramesh L., School of Business and Management, Christ University, India; John N.K., School of Business and Management, Christ University, India