Abstract
Capital market boom increases private investment and national production. Identifying the variables affecting the stock price is one of the factors that provides the possibility of directing the capital market to a state of stability and economic prosperity. The stock price index depends on various variables including institutional factors. Favorable institutional factors such as governance indicators provide a safe, stable and low-risk environment for more investment and make the stock market more efficient. In this research, the relationship between the governance indicators that represent the quality of the society's governing institutions and the stock price index of the Tehran Stock Exchange has been examined and empirically analyzed. The results of panel data model estimation for 14 industrial groups in Tehran Stock Market in the period (1376-1991) show that there is a positive and significant relationship between the indicators of corruption control and the effectiveness of the government with the coefficients (5.62) and (1.72) respectively and the growth of the stock price index. Also index The indicator of the interaction effect of the rule of law, the quality of law and regulations with coefficients (08-E53/4) has a positive and significant relationship on the growth of the stock price index of the industrial groups under investigation, and the improvement of the indicators of the right to comment and accountability and the interaction effect of corruption control and political stability improve the performance of the Tehran stock market. In this way, improving the quality of governance indicators provide suitable conditions for further prosperity of the stock market price index.
Key words: Governance indices, stock price index returns, political stability and non-violence, corruption control
Chapter one:
General research
1-1. Introduction
One of the characteristics of the common movement towards sustainable economic development is obtaining the necessary resources for the set of economic activities by equipping the existing savings resources in the national economy. In recent decades, the role of the capital market and the expansion of financial markets have had a relatively high relationship with the economic growth of countries. Countries such as America, Japan, England, South Korea, Singapore, etc. These financial markets and especially the stock exchange have been used a lot in the direction of economic development and growth. One of the most important influencing factors in increasing investment and economic growth and development is having strong and efficient markets along with suitable and active financial organizations in these markets. The stock market is one of the constituent parts of the financial market, and as a part of the economy, it is subordinate to the financial market. If this market does not have a logical relationship with other sectors, there will be shortcomings in its performance. The stagnation and boom of the stock market can affect not only the national economy, but also the global economy (Najjarzadeh et al., 2008).
For example, the Great Depression of the 1930s and the recession of most capitalist countries started from the New York Stock Exchange. Also, the 1997 crisis of Southeast Asian countries (which started from the financial markets of those countries) had an impact on the world economy, including on the economy of Iran, through the reduction of the demand of these countries for crude oil and the fall in oil prices. It can be seen that there is a significant relationship between stock market changes and economic recession and prosperity (Samadi, Shirani Fakhr and Davrzadeh, 2016).
Tehran Stock Exchange, which is known as the most important institution of the country's capital market, despite being about 4 decades old, has always faced many ups and downs for various reasons and has experienced different periods of prosperity and recession. Therefore, knowing the characteristics of this market and solving its bottlenecks is of special importance and requires extensive research and efforts. It demands.
Identifying the factors affecting the stock price and analyzing the stock price behavior against these factors can help to improve the prosperity of the capital market and affect the better evaluation of the stock exchange and improve and control its performance, which in turn can satisfy most of the investors' and shareholders' needs (Reza Qolizadeh, Yavari, Sahabi and Salehabadi, 1392).
One of the important factors affecting the stock price index are political factors.In this research, governance indicators that are representative of political factors have been used to investigate the effect of political factors on the performance of the stock price index.
1-2. Statement of the problem
Developed countries owe a large part of their development to the financial markets, especially the stock exchange. The stock exchange is one of the most important financial markets, which is an indicator of the economy of any country. The recession and prosperity of the stock exchange affects not only the national economy but also the regional and global economy. On the one hand, the stock market is a place to collect savings and liquidity of the private sector in order to finance investment projects, and on the other hand, it is an official and reliable reference that the holders of stagnant savings can search for a relatively suitable and safe place to invest and use their funds to invest in companies. Various indicators are considered to analyze the performance of stock markets. The most important influencing factor for investors' decisions in the stock exchange is the stock price index. Naturally, many factors are effective in forming the information and views of the market parties and finally the stock price of the companies. Part of these internal factors and part of it is caused by the situation of variables outside the scope of the domestic economy. Based on this, the factors affecting stock prices are classified into internal factors and external factors.
1. Internal factors include factors affecting the stock price in connection with the company's operations and decisions.
2. External factors include factors beyond the authority of the company's management, in such a way that they affect the company's activity.
In general, external factors are divided into the following two parts:
2- a. Economic factors: Economic prosperity and recession greatly affect the stock market. Thus, during the period of economic prosperity, with an increase in investment in the stocks of growing companies, their stock prices will increase, and in a recession, the prices of the companies' stocks will decrease; Because in this situation, investing in financial assets with fixed income is superior to investing in common stocks.
B. Political factors: Empirical evidence shows that one of the characteristics of the stock exchange is its immediate influence from political factors. For example, the possibility of a political faction coming to power that is against the ruling views of the current economic conditions, or the sudden death of a high-ranking official of a country, can all be considered influential factors. Breaking political and economic relations with other countries can also affect stock prices, issues such as war and peace also have a significant impact on stock prices.
There are various parameters to measure political factors. One of these parameters is governance indicators. So far, many studies have been conducted on the effect of political factors on financial markets, including the stock market, but no study has been conducted that examines the effect of 6 governance indicators simultaneously on the performance of industrial stock price indices. In this research, the effect of governance indicators as a representative of Political factors on the performance of Iran's stock price index are investigated.
1-3. Research objectives
Investigating and analyzing the effect of governance indicators on the stock price index performance of industrial groups in Tehran Stock Market
1-4.