Essays on an Emerging Financial Market

Abstract

Stock markets in emerging economies are often viewed as a source of financial development and ultimately economic growth. Well-operating or efficient stock markets may contribute to the development of a country’s financial sector through increase in savings, efficient allocation of capital to the most profitable investments and improved use of the existing resources. Efficiency of stock markets is especially important for countries with developing economies as these countries aim to catch up with global economic growth. For countries with emerging economies to benefit from equity financing, it is important that their stock exchanges at least pass the lowest level of market efficiency, that is, weak-form efficiency. This implies that existing stock prices reflect all information about historical prices and trading volumes.

Emerging economies share common features in particular with respect to their financial sector where the banking system dominates in raising finance, while stock markets are relatively less important (indirect versus direct finance). However, by providing alternative means of financing investment, stock markets may curtail the effects of bank dominance. In Suriname the banking system has traditionally also been the major player in the financial sector. With this the stock exchange in Suriname can be seen as an alternative financial source. Given the role that the stock exchange in Suriname can perform, this thesis investigates the Suriname Stock Exchange (SSE) as part of Suriname’s financial market. We study the empirical properties including weak-form efficiency of the stock returns of ten companies listed at the SSE. We also considered stock price performance of these companies and the link between that performance and fundamentals. We managed to collect unique data through various possibilities of data collection.

An interesting facet of economic growth is that much of it occurs through the growth in the size of a country’s existing companies. This increases an interest to understand more about the top executives of the companies listed at the SSE. They are responsible for the financial and strategic decisions and if we want to comprehend why companies perform the way they do, we must reflect on the characteristics of their most influential actors. Their risk attitude is considered to be important in the value creation for shareholders and future investors. Most if not all current research focuses on the risk attitudes of top executives in westernized companies. We investigate the risk attitudes of leading executives in an emerging economy and we relate their risk attitudes with company performance.