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Governance Indicators and Stock Market Development: Is There Any Discrepancy Between Developing and Developed Countries? Evidence from Fragile Five and G8 Countries

Nuri Avşarlıgil,Seda Sönmez

Published 2026 in SAGE Open

ABSTRACT

Stock market development (SMD) which triggers economic growth can be achieved with good governance proxies. The importance of these two variables in economic growth is the starting motivation of this study. The paper aims to examine the relationship between governance indicators and stock market development and find answers to whether there is a discrepancy between developing and developed countries via Fragile Five and G8 countries by using ARDL and NARDL models, 1996 to 2020 annually. Empirical analyses on the base of the corresponding relation gave results in favor of developed countries. Besides the results of the paper, the key finding involved the fact that although World Governance Indicators of the World Bank could explain the changes in SMD index in G8 countries; additional independent variables and/or other SMD indexes were needed for determining what exactly explained or influenced SMD in other Fragile Five countries except for Brazil. The convenient result for G8 countries shows the discrepancy between developed and developing countries in terms of governance indicators and SMD and supports the aim of the paper.

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