1810-49671812-9358
Business Perspectives
  • Login

Editorial office contact form

Please complete all required fields!

Please specify your request here

Should not be empty
Should not be empty
Should not be empty
Should not be empty
Captcha Refresh Invalid data

Your request has been successfully sent.

Your Cart

Price Total
€0.00

(₴0)

Proceed to Checkout
Your cart is empty
Cart 0 Items
Submit Manuscript
  • About Us
  • Journals
  • Publishing policies
  • Editorial Policies
  • Books
FOLLOW US
  • Home
  • Journals
  • Investment Management and Financial Innovations
  • Issue #2
  • Do institutional quality and capital account openness affect capital flow? Evidence from Asian bond markets

Do institutional quality and capital account openness affect capital flow? Evidence from Asian bond markets

  • Received December 24, 2024;
    Accepted March 10, 2025;
    Published April 24, 2025
  • Author(s)
    Link to ORCID Index: https://orcid.org/0000-0003-3920-8493
    Swarupa Ranjan Panigrahi
    ORCID ,
    Link to ORCID Index: https://orcid.org/0000-0001-8459-2055
    Suresha B.
    ORCID ,
    Link to ORCID Index: https://orcid.org/0000-0002-7852-7158
    Krishna T. A.
    ORCID ,
    Link to ORCID Index: https://orcid.org/0000-0002-9195-1367
    Latha Ramesh
    ORCID ,
    Link to ORCID Index: https://orcid.org/0000-0002-3770-8956
    Nijumon K. John
    ORCID
  • DOI
    http://dx.doi.org/10.21511/imfi.22(2).2025.13
  • Article Info
    Volume 22 2025, Issue #2, pp. 155-168
  • TO CITE АНОТАЦІЯ
  • 147 Views
  • 48 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

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 2002–2023. 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.

view full abstract hide full abstract
  • PAPER PROFILE
  • AUTHORS CONTRIBUTIONS
  • FIGURES
  • TABLES
  • REFERENCES
  • Keywords
    control of corruption, government effectiveness, local bond market, political stability, public governance, regulatory quality, rule of law, voice & accountability
  • JEL Classification (Paper profile tab)
    F32, G15, K22, K12
  • References
    76
  • Tables
    6
  • Figures
    1
    • Figure 1. Conceptual framework
    • Table 1. Descriptive statistics of research variables
    • Table 2. Pairwise correlation coefficient of all the variables in the model
    • Table 3. Results of the unit root ADF – Fisher Chi-square test
    • Table 4. Hausman test and Breusch-Pagan LM tests for random effects
    • Table 5. Panel data regression model
    • Table A1. Operational definition of variables
    • Agyei, S. K., Obuobi, N. K., Isshaq, M. Z., Abeka, M. J., Gatsi, J. G., Boateng, E., & Amoah, E. K. (2022). Country-Level corporate governance and Foreign Portfolio Investments in Sub-Saharan Africa: The moderating role of institutional quality. Cogent Economics & Finance, 10(1), 2106636.
    • Ahmed, S., & Zlate, A. (2014). Capital flows to emerging market economies: A brave new world? Journal of International Money and Finance, 48(PB), 221-248.
    • Aizenman, J., Chinn, M. D., & Ito, H. (2020). Financial Spillovers and Macroprudential Policies. Open Economies Review, 31(3), 529-563.
    • Akhtaruzzaman, M., Hajzler, C., Owen, P. D., Akhtaruzzaman, M., Hajzler, C., & Owen, P. D. (2017). Does institutional quality resolve the Lucas Paradox? Applied Economics, 00(00), 1-20.
    • Akisik, O. (2020). The impact of financial development, IFRS, and rule of LAW on foreign investments: A cross-country analysis. International Review of Economics & Finance, 69, 815-838.
    • Alfaro, L., Kalemli-Ozcan, S., & Volosovych, V. (2008). Why doesn’t capital flow from rich to poor countries? An empirical investigation. Review of Economics and Statistics, 90(2), 347-368.
    • Al-Smadi, M. O. (2018). Determinants of foreign portfolio investment: The case of Jordan. Investment Management and Financial Innovations, 15(1), 328-336.
    • Amin, A., Khan, R. U., & Maqsood, A. (2023). Financial development, entrepreneurship and financial openness: evidence from Asia. Journal of Economic and Administrative Sciences, 39(3), 671-686.
    • Apaitan, T., Luangaram, P., & Manopimoke, P. (2022). Uncertainty in an emerging market economy: evidence from Thailand. Empirical Economics, 62(3), 933–989.
    • Arteta, C., Eichengreen, B., & Wyplosz, C. (2003). When does capital account liberalization help more than it hurts? Economic Policy in the International Economy: Essays in Honor of Assaf Razin, 3, 177-206.
    • Ashenafi, B. B., & Dong, Y. (2023). Financial openness, financial sector development, and income inequality: With an extensive set of pull and push factors. African Development Review, 35(2), 138-151.
    • Bathia, D., Demirer, R., Ferrer, R., & Raheem, I. D. (2023). Cross-border capital flows and information spillovers across the equity and currency markets in emerging economies. Journal of International Money and Finance, 139, 102948.
    • Bhatta, S. R., Adhikari, P., & Byanjankar, R. (2020). Choice of Regression Models in Time Series Data. Economic Journal of Development Issues, 29(1), 101-129.
    • Bhujabal, P., Sethi, N., & Padhan, P. C. (2024). Effect of institutional quality on FDI inflows in South Asian and Southeast Asian countries. Heliyon, 10(5), e27060.
    • Boonman, T. M. (2023). Portfolio capital flows before and after the Global Financial Crisis. Economic Modelling, 127, 106440.
    • Breusch, T. S., & Pagan, A. (1980). The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics. The Review of Economic Studies, 47(1), 239-253.
    • Burger, J. D., Sengupta, R., Warnock, F. E., & Warnock, V. C. (2015). US investment in global bonds: as the Fed pushes, some EMEs pull. Economic Policy, 30(84), 729-766.
    • Ceesay, E. K., & Moussa, Y. M. (2022). Pooled ordinary least-square, fixed effects and random effects modelling in a panel data regression analysis: a consideration of international commodity price and economic growth indicators in 35 Sub-Saharan African countries. International Journal of Technology Transfer and Commercialisation, 19(1), 23-44.
    • Cerdeiro, D. A., & Komaromi, A. (2021). Financial openness and capital inflows to emerging markets: In search of robust evidence. International Review of Economics and Finance, 73, 444-458.
    • Chen, F., & Jiang, G. (2023). The impact of institutional quality on foreign direct investment: empirical analysis based on mediating and moderating effects. Economic Research-Ekonomska Istraživanja, 36(2).
    • Chinn, M. D., & Ito, H. (2006). What matters for financial development? Capital controls, institutions, and interactions. Journal of Development Economics, 81(1), 163-192.
    • Cieślik, A., & Goczek, Ł. (2018). Control of corruption, international investment, and economic growth – Evidence from panel data. World Development, 103, 323-335.
    • Damasceno, A. O., & Guedes, D. R. (2024). Financial openness, capital accumulation, and productivity in emerging and developing economies. Economic Modelling, 133, 106663.
    • Davis, J. S., & Zlate, A. (2023). The global financial cycle and capital flows during the COVID-19 pandemic. European Economic Review, 156, 104477.
    • Eguren-Martin, F., O’Neill, C., Sokol, A., & von dem Berge, L. (2024). Capital flows-at-risk: Push, pull and the role of policy. Journal of International Money and Finance, 147, 103146.
    • Eller, M., Huber, F., & Schuberth, H. (2020). How important are global factors for understanding the dynamics of international capital flows? Journal of International Money and Finance, 109.
    • Feng, C., Han, L., Vigne, S., & Xu, Y. (2023). Geopolitical risk and the dynamics of international capital flows. Journal of International Financial Markets, Institutions and Money, 82, 101693.
    • Ferreira, M. A., & Miguel, A. F. (2011). The determinants of domestic and foreign bond bias. Journal of Multinational Financial Management, 21(5), 279-300.
    • Forbes, K. J., & Warnock, F. E. (2012). Capital flow waves: Surges, stops, flight, and retrenchment. Journal of International Economics, 88(2), 235-251.
    • Forbes, K., Fratzscher, M., Kostka, T., & Straub, R. (2016). Bubble thy neighbour: Portfolio effects and externalities from capital controls. Journal of International Economics, 99, 85-104.
    • Gelos, G., Gornicka, L., Koepke, R., Sahay, R., & Sgherri, S. (2022). Capital flows at risk: Taming the ebbs and flows. Journal of International Economics, 134, 103555.
    • Gori, F., Lepers, E., & Mehigan, C. (2024). Capital flow deflection under the magnifying glass. International Journal of Finance and Economics, 29(3), 3758-3778.
    • Gupta, S., Yadav, S. S., & Jain, P. K. (2024). Does institutional quality matter for foreign direct investment flows? Empirical evidence from BRICS economies. International Journal of Emerging Markets, 19(12), 4431-4458.
    • Harrison, A., & Reed, R. R. (2023). International capital flows, liquidity risk, and monetary policy. Journal of Macroeconomics, 77, 103540.
    • Hausman, J. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251-1271.
    • Hussain, M., & Goswami, B. (2022). Sector Specific Determinants of Foreign Portfolio Investment Inflows in India: A Panel ARDL Approach. Global Business Review, 09721509221137204.
    • Igan, D., Kutan, A. M., & Mirzaei, A. (2020). The real effects of capital inflows in emerging markets. Journal of Banking and Finance, 119, 105933.
    • Jain, P. K., Kuvvet, E., & Pagano, M. S. (2017). Corruption’s impact on foreign portfolio investment. International Business Review, 26(1), 23-35.
    • Julio, B., & Yook, Y. (2016). Policy uncertainty, irreversibility, and cross-border flows of capital. Journal of International Economics, 103, 13-26.
    • Kaya, A. I., & Erden, L. (2023). Capital-flow volatility in emerging markets: A panel GARCH approach. International Finance, 26(2), 172-188.
    • Kaya, A. I., Erden, L., & Ozkan, I. (2022). Detecting capital flow surges in developing countries. International Journal of Finance & Economics, 27(3), 3510-3530.
    • Kharabsheh, B., & Gharaibeh, O. K. (2022). Corruption, political instability and their impact on investment: An FMOLS approach. Investment Management and Financial Innovations, 19(1), 77-90.
    • Kollamparambil, U., & Gumbo, D. (2018). Capital flight in Africa : an analysis of macroeconomic and institutional quality determinants. African Finance Journal, 20(2).
    • Kwabi, F. O., Boateng, A., Wonu, C., Kariuki, C., & Du, A. (2023). Political uncertainty and cross-border equity portfolio allocation decisions: International evidence. International Review of Financial Analysis, 87, 102562.
    • La Porta, R., Lopez-De-Silanes, F., Shleifer, A., & Vishny, R. W. (1997). Legal determinants of external finance. Journal of Finance, 52(3), 1131-1150.
    • Le, A. H., & Kim, T. (2021). The Impact of Institutional Quality on FDI Inflows: The Evidence from Capital Outflow of Asian Economies. Journal of Asian Finance, Economics and Business, 8(8), 335-0343.
    • Lestari, D., Lesmana, D., Yudaruddin, Y. A., & Yudaruddin, R. (2022). The impact of financial development and corruption on foreign direct investment in developing countries. Investment Management and Financial Innovations, 19(2), 211-220.
    • Luangaram, P., & Sethapramote, Y. (2020). Capital flows and political conflicts: Evidence from Thailand. Economics of Peace and Security Journal, 15(2), 83-100.
    • Lucas, Jr, R. E. (1990). Why doesn’t capital flow from rich to poor countries? American Economic Review Papers and Proceedings, 80.
    • Makoni, P. L. (2020). Foreign portfolio investments, exchange rates and capital openness: A panel data approach. International Journal of Economics and Business Administration, 8(2), 100-113.
    • Murdipi, R., Baharumshah, A. Z., & Law, S. H. (2023). Portfolio capital flows and economic growth: Do institutional factors matter? Research in International Business and Finance, 66, 102019.
    • Newell, G., & Marzuki, M. J. (2023). The impact of the COVID-19 crisis on global real estate capital flows. Journal of Property Investment & Finance, 41(5), 553-573.
    • Nguyen, M. L. T., Doan, T. T. T., & Bui, T. N. (2021). The impact of macroeconomic and control of corruption on foreign direct investment inflows. Polish Journal of Management Studies, 24(1), 236-249.
    • Nguyen, T. T., Nasir, M. A., & Vo, X. V. (2024). Exchange rate dynamics of emerging and developing economies: Not all capital flows are alike. International Journal of Finance and Economics, 29(1), 1115-1124.
    • Omotoso, M. O., Schutte, D. P., & Oberholzer, M. (2022). The effect of the adoption of International Financial Reporting Standards on foreign portfolio investment in Africa. South African Journal of Accounting Research, 36(1), 57-79.
    • Park, S., & Yang, J.-S. (2021). Relationships between capital flow and economic growth: A network analysis. Journal of International Financial Markets, Institutions and Money, 72, 101345.
    • Pasricha, G. K. (2018). Policy Rules for Capital Controls. SSRN Electronic Journal, 6.
    • Phuong, L. C. M. (2020). Corruption and stock market development in EAP countries. Investment Management and Financial Innovations, 17(2), 266-276.
    • Prabheesh, K. P., Kumar, S., & Shareef, A. O. (2023). Revisiting the impact of foreign portfolio investment on stock market performance during COVID-19 pandemic uncertainty: Evidence from India. MethodsX, 10, 101988.
    • Prakash, N., & Panigrahi, S. R. (2021). The impact of external debt on economic growth in emerging economies: investigating the role of capital formation. International Journal of Economic Policy in Emerging Economies, 1(1), 1.
    • Qureshi, F., Qureshi, S., Vinh Vo, X., & Junejo, I. (2021). Revisiting the nexus among foreign direct investment, corruption and growth in developing and developed markets. Borsa Istanbul Review, 21(1), 80-91.
    • Ramzan, M. (2021). Symmetric impact of exchange rate volatility on foreign direct investment in Pakistan: do the global financial crises and political regimes matter? Annals of Financial Economics, 16(04), 2250007.
    • Roy, S., & Kemme, D. M. (2020). The run-up to the global financial crisis: A longer historical view of financial liberalization, capital inflows, and asset bubbles. International Review of Financial Analysis, 69(July 2019), 101377.
    • Saha, S., Sadekin, M. N., & Saha, S. K. (2022). Effects of institutional quality on foreign direct investment inflow in lower-middle income countries. Heliyon, 8(10), e10828.
    • Sarno, L., Tsiakas, I., & Ulloa, B. (2016). What drives international portfolio flows? Journal of International Money and Finance, 60, 53-72.
    • Shovon, K. H. (2021). International Financial Reporting Standards Adoption, Investor Protection, and Foreign Portfolio Investment: a Review. International Journal of Accounting & Finance Review, 9(1), 17-38.
    • Simbi, C., Arendse, J. A., & Khumalo, S. A. (2023). IFRS and FPI nexus: does the quality of the institutional framework matter for African countries? Journal of Accounting in Emerging Economies, 13(1), 195-215.
    • Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65-94.
    • Syarifuddin, F., & Setiawan, M. (2021). Capital Flow Amid The Covid-19 Pandemic: Cross-Country Contagion Effect Among Asean5 And Projection Of The Impacts For The Indonesian Economy.
    • Taşdemir, F. (2023). Financial Globalization and Growth: The Impacts of Financial Development and Governance. World Journal of Applied Economics, 9(1), 99-111.
    • Tian, X., de Haan, J., & Zhao, Y. (2023). Capital flows, economic growth and the real effective exchange rate: Evidence from China. Economic and Political Studies, 11(1), 123-147.
    • Ur Rehman, F., Popp, J., Ahmad, E., Khan, M. A., & Lakner, Z. (2021). Asymmetric and symmetric link between quality of institutions and sectorial foreign direct investment inflow in India: A fresh insight using simulated dynamic ARDL approach. Sustainability (Switzerland), 13(24).
    • Wu, J., Li, S., & Selover, D. D. (2012). Foreign Direct Investment vs. Foreign Portfolio Investment. Management International Review, 52(5), 643-670.
    • Yu, Y., & Qayyum, M. (2023). Impacts of financial openness on economic complexity: Cross-country evidence. International Journal of Finance & Economics, 28(2), 1514-1526.
    • Yunan, Z. Y., & Pacheco-Jaramillo, W. A. (2024). Does corruption play a role in the process of financial globalization in emerging countries? Journal of Financial Crime, ahead-of-print(ahead-of-print).
    • Zander, T. (2021). Does corruption matter for FDI flows in the OECD? A gravity analysis. In International Economics and Economic Policy, 18(2). Springer Berlin Heidelberg.
    • Conceptualization
      Swarupa Ranjan Panigrahi, Suresha B.
    • Data curation
      Swarupa Ranjan Panigrahi, Nijumon K. John
    • Formal Analysis
      Swarupa Ranjan Panigrahi
    • Funding acquisition
      Swarupa Ranjan Panigrahi, Suresha B., Krishna T. A., Nijumon K. John
    • Investigation
      Swarupa Ranjan Panigrahi
    • Methodology
      Swarupa Ranjan Panigrahi, Suresha B., Latha Ramesh
    • Project administration
      Swarupa Ranjan Panigrahi, Nijumon K. John
    • Resources
      Swarupa Ranjan Panigrahi
    • Software
      Swarupa Ranjan Panigrahi
    • Validation
      Swarupa Ranjan Panigrahi, Suresha B., Krishna T. A., Latha Ramesh, Nijumon K. John
    • Visualization
      Swarupa Ranjan Panigrahi, Suresha B., Krishna T. A., Latha Ramesh, Nijumon K. John
    • Writing – original draft
      Swarupa Ranjan Panigrahi
    • Supervision
      Suresha B., Krishna T. A., Latha Ramesh, Nijumon K. John
    • Writing – review & editing
      Suresha B., Krishna T. A., Latha Ramesh, Nijumon K. John
Related Articles
  • Public finances, governance control and economic growth: a macroeconomic history approach

    Ola Honningdal GryttenORCID Researcher ID doi: http://dx.doi.org/10.21511/imfi.16(1).2019.15
    Investment Management and Financial Innovations Volume 16, 2019         Issue #1         pp. 189-202 Views: 2713 Downloads: 566 TO CITE АНОТАЦІЯ

    The size of the public sector is an important tool in public governance. Public sector size may fuel both economic growth and political influence over the economy.
    By compiling and processing data from different sources of public accounts the paper aims at mapping the development of key financial indicators for the Norwegian central government sector during the transition period from the mid 19th to the mid 20th century. The data enable us to give measures of the size of the public sector alone and compared to the overall economy.
    It is found that the sector started its continuous growth before politicians deliberately started to increase the sector’s size of the total economy. The paper also finds that an increase of the public sector often, but not always, reflects political economy regimes. Persistent growth in public finances as a tool for economic policy making did not take place before the introduction of the social-democratic regime in 1935.
    The paper also concludes that economic growth started before the growth in the public sector, suggesting that public sector growth might as well be a result of economic growth or vice versa.

  • Economic freedom and democracy: determinant factors in increasing macroeconomic stability

    Yuri Yevdokimov , Leonid MelnykORCID Researcher ID, Oleksii LyulyovORCID Researcher ID, Olga PanchenkoORCID , Victoria KubatkoORCID doi: http://dx.doi.org/10.21511/ppm.16(2).2018.26
    Problems and Perspectives in Management Volume 16, 2018         Issue #2         pp. 279-290 Views: 1836 Downloads: 311 TO CITE АНОТАЦІЯ

    The main goal of the article is to analyze the role and influence of economic freedom on macroeconomic stability. For this purpose, the authors used the integrated index of economic freedom, calculated by the Heritage Foundation and Democracy Index. It is noted that this index indicator was calculated by the experts from the World Bank using the index of voice and accountability. In the paper, the authors used the multinational panel dataset for 11 countries of the EU for the purpose of checking the correlation between economic freedom, democracy and macroeconomic stability. It should be highlighted that the abovementioned 11 countries are related by the fluctuation of economic growth during the transformation process (1996–2016) from communist party to the democracy and political pluralism. In addition, the authors proposed to add the indicators of political stability and trade openness, which allowed to take into account implementation of flexible macroeconomic instruments, including monetary policy, which towards increasing the economic growth, employment and financial development of the countries. The findings are directed received using the regression equation with fixed and random effects showed the high level of correspondence of the model used with the original observations. Despite the chosen approach to estimate the macroeconomic stability, the findings showed that there is a positive and statistically significant impact of economic freedom and democracy on macroeconomic stability.

  • Citizen participation and electricity sector governance in Lithuania: current state and future perspectives

    Andrius StasiukynasORCID , Mantas BileišisORCID , Vainius SmalskysORCID doi: http://dx.doi.org/10.21511/ppm.16(3).2018.15
    Problems and Perspectives in Management Volume 16, 2018         Issue #3         pp. 189-196 Views: 1054 Downloads: 216 TO CITE АНОТАЦІЯ

    The paper presents a study, which describes the current governance model of the electricity sector in Lithuania. Electricity and energy production and distribution is highly regulated worldwide. This is also true in Lithuania, where the electricity sector is highly politically prominent, and policy is highly centralized. There are geopolitical concerns towards Russia, which is an important supplier of electricity, and Lithuania’s grid is highly integrated with that of Russia. In addition, Lithuania is a small country dominated by a small number of large state-owned producers and has no regional administrations. Lithuania rhetorically has adopted increased citizen participation as a strategic policy goal. The study investigates how far the rhetorics are followed up by policy planning, implementation, and development of new governance modes. The authors base the study on interviews with 19 experts and regulation analysis. The study found that regulation process is transparent, but this causes lower public interest and consequently lower citizen participation. Existing stakeholder involvement at the policy level is highly arbitrary and favorable to large electricity producers. As production is set to decentralize, this has the potential to overburden the regulatory system and cause conflict between different producers.

< Prev Next >
Download Preview
Close
Investment Management and Financial Innovations
Investment Management and Financial Innovations
  • Issue #2
  • Journal Homepage
  • Indexed/Abstracted
  • Aims and Scope
  • Editorial Board
  • Editorial Policies and Publication Ethics
  • Submission Guidelines for Authors
  • Copyright and Permissions
  • Acceptance rate
  • Self-Archiving Policy
  • Article processing charge
 

COOKIES
The cookie settings on this website are set to 'allow all cookies' to give you the best experience.

If you continue without changing these settings, you consent to this Read more

Accept
newsletter
We accept payment with:
  • visa
  • mastercard
  • ISNI: 0000 0004 6439 8257
  • Copyright © 2025 LLC “CPC “Business Perspectives”,
    except Open Access articles

Developed by MindK. Designed by Crisp.

  • About Us
    • Company
    • News
    • Cooperation and partners
    • Advertising
    • Manuscript Administration System
  • Users support
    • Your profile
    • External services instructions
    • Site navigation
Contact us
  • Hryhorii Skovoroda lane, 10 Sumy, 40022 , Ukraine
  • +380-542-221707
  • +38-063-2891070
  • Privacy Policy
  • Cookie Policy
  • Terms and Conditions
Tweets by LLC “Business Perspectives”