Chapter 11: The Impact of Institutional Quality on Stock Market Performance in Emerging Economy: Evidence from the ARDL Bound Approach

For the last two decades economics literature and debates have increasingly referred to institutions as the answers to the long-lasting queries regarding how stock market performance rises and what policies can be implement to encourage best outcomes in terms of stock market performances in Malaysia so that the analysis of the institutional basis under which any stock market functions has now converted an essential issue of investigation. This study attempts to capture the relationship between stock market movements and institutional quality (IQ) using autoregressive distributed lag bounds testing approach, over 33 years during the period of 1984–2016. The finding suggests that IQ positively and significantly affects stock market performance. Moreover, it is also showing that there is, in fact, a causal relationship between institutions and stock market performance. The findings are robust to changes in specification and a host of transparency measures.