465 JOSÉ ALEXANDRE ALBUQUERQUE DE SOUSA This dissertation consists of three empirical papers about the determinants and consequences of fi nancial market development in an international context. It aims to contribute to our understanding of the functioning of global fi nancial markets. Each chapter provides evidence of a di erent issue related to a specifi c stage of fi nancial market development. International stock markets Chapter 2 provides an evaluation of the relative importance of structural and policy determinants of JOSÉ ALEXANDRE ALBUQUERQUE DE SOUSA fi nancial sector development by analyzing the success and failure of 59 newly established (“nascent”) stock markets since 1975. The results point to a more important role of banks, demand factors, and early Essays on the determinants and consequences success in fostering long-term stock market development, rather than structural factors such as legal and of nancial market development political institutions. Chapter 3 examines the political consequences of opening a stock exchange in 34 African countries over 1960-2016. This chapter shows that political leaders stay longer in o ce when they open a stock exchange if local political institutions are autocratic. Moreover, opening a stock exchange in autocracies is associated with slower subsequent democratization of political institutions. This result is surprising, because it suggests that incumbent elites may actually have incentives to support fi nancial development, rather than opposing it. Chapter 4 investigates the role of institutional investors on the governance of listed US fi rms, by analyzing the impact of ties between index and non-index funds within the same mutual fund family on the value of fi rms in which both funds invest. This chapter shows that family ties are associated with higher non-index fund ownership. Furthermore, fi rms held by funds with family ties are more profi table and have higher valuations. The Erasmus Research Institute of Management (ERIM) is the Research School (Onderzoekschool) in the fi eld of management of the Erasmus University Rotterdam. The founding participants of ERIM are the Rotterdam School of Management (RSM), and the Erasmus School of Economics (ESE). ERIM was founded in 1999 and is o cially accredited by the Royal Netherlands Academy of Arts and Sciences (KNAW). The - International stock markets research undertaken by ERIM is focused on the management of the fi rm in its environment, its intra- and interfi rm relations, and its business processes in their interdependent connections. The objective of ERIM is to carry out fi rst rate research in management, and to o er an advanced doctoral programme in Research in Management. Within ERIM, over three hundred senior researchers and PhD candidates are active in the di erent research programmes. From a variety of academic backgrounds and expertises, the ERIM community is united in striving for excellence and working at the forefront of creating new business knowledge. ERIM PhD Series Research in Management Erasmus University Rotterdam (EUR) Erasmus Research Institute of Management Mandeville (T) Building Burgemeester Oudlaan 50 3062 PA Rotterdam, The Netherlands P.O. Box 1738 3000 DR Rotterdam, The Netherlands T +31 10 408 1182 E [email protected] W www.erim.eur.nl 31259_middelen_dissertatie_Albuquerque_de_Sousa_Cover.indd Alle pagina's 28-03-19 12:11 International stock markets: Essays on the determinants and consequences of financial market development International stock markets: Essays on the determinants and consequences of financial market development Internationale aandelenmarkten: Essays over de determinanten en consequenties van de ontwikkeling van financiële markten Thesis to obtain the degree of Doctor from the Erasmus University Rotterdam by command of the rector magnificus Prof. dr. R.C.M.E. Engels and in accordance with the decision of the Doctorate Board. The public defence shall be held on Thursday 02 May 2019 at 13:30 hours by JOSÉ ALEXANDRE ALBUQUERQUE DE SOUSA born in Porto, Portugal Doctoral Committee Doctoral dissertation supervisors: Prof. dr. M.A. van Dijk Prof. dr. P.A.G. van Bergeijk Other members: Prof. dr. T. Beck Dr. Egemen Genc Prof. dr. D. Schoenmaker Erasmus Research Institute of Management – ERIM The joint research institute of the Rotterdam School of Management (RSM) and the Erasmus School of Economics (ESE) at the Erasmus University Rotterdam Internet: www.erim.eur.nl ERIM Electronic Series Portal: repub.eur.nl/ ERIM PhD Series in Research in Management, 465 ERIM reference number: EPS-2019-465-F&A ISBN 978-90-5892-542-8 © 2019, José A. Albuquerque de Sousa Design: PanArt, www.panart.nl This publication (cover and interior) is printed by Tuijtel on recycled paper, BalanceSilk® The ink used is produced from renewable resources and alcohol free fountain solution. Certifications for the paper and the printing production process: Recycle, EU Ecolabel, FSC®, ISO14001. More info: www.tuijtel.com All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the author. In memory of my father Acknowledgements i Acknowledgements “We don’t exist unless there is someone who can see us existing, what we say has no meaning until someone can understand, while to be surrounded by friends is constantly to have our identity confirmed; their knowledge and care for us have the power to pull us from our numbness.” Alain de Botton, “The Consolations of Philosophy” I owe sincere and earnest thankfulness to those who acknowledged my existence during the process of writing this dissertation. Prof. Mathijs van Dijk helped me initiate this journey by hiring me as a research assistant during my Master studies. Mathijs showed me the pleasure of doing research, and his contagious enthusiasm inspired me to pursue this career path. Mathijs, thank you for all the time you have devoted to helping me become a better researcher. Your dedication, patience, open-mindedness, attention to detail, and especially you trust and investment in my development will remain in my memory for many years to come. Another enormous source of inspiration was my second promotor, Prof. Peter van Bergeijk. Peter, thank you for your always kind guidance in the past four years. I cherish the moments in which you caught me off guard by your astute observations. Above all, I truly admire your free-spirited attitude. I would also like to thank the members of my doctoral committee, Prof. Thorsten Beck, Dr. Egemen Genc, and Prof. Dirk Schoenmaker for the valuable insights, suggestions, and comments on my work. Besides being part of my doctoral committee and co-author of one of the papers in this dissertation, Prof. Thorsten Beck also offered me the opportunity to work on the project “Long-term financing for Africa”, commissioned by the Financial Sector Deepening in Africa. Through this opportunity I was able to experience the joy of having a real impact in the financial world. Thorsten, I am truly inspired by your energy, passion, and drive to make things happen. ii Acknowledgements The RSM Finance department offered me an excellent working environment. I would like to thank all the present and past members that I came across during my studies: Mark van Achter, Dion Bongaerts, Hoyong Choi, Mathijs Cosemans, Sarah Draus, Li He, Abe de Jong, Thomas Lambert, Mancy Luo, Arjen Mulder, Peter Neuteboom, Anjana Rajamani, Peter Roosenboom, Frederik Schlingemann, Claus Schmitt, Elvira Sojli, Fabrizio Spargoli, Marta Szymanowska, Ben Tims, Francisco Urzúa Infante, Marno Verbeek, and Wolf Wagner. To our office manager and secretary, Myra Lissenberg-van der Pennen and Flora van Oosterom-Pos: your help and conviviality were much appreciated! A special thank you to my colleague and friend Arjan Osté, who I assisted for the Bachelor Course Financiële Processen. Arjan, your integrity and dedication make you a role model not only for me, but also for all the students that are lucky enough to have you as a teacher. I am grateful to my fellow PhD students, who put up with me the most during the past four years: Aleksandrina, Dominik, Eden, Georgi, Stefan, Rómulo, Rogier, Roy, Taavi, Vlado, and especially my roommates Gelly, Lennard, Lingtian, and Marina. Being around you was not only a great experience, but also fun! I express my gratitude to Prof. Gustavo Manso, who hosted my research visit to the Haas School of Business, University of California at Berkeley, and the PhD students Carlos, Paulo, and Petra, for the great conversations about the Finance discipline during the lunch and coffee breaks. Finally, I would like to thank my family and friends, particularly Jan, Trees, and Pedro, for their unconditional support. I am indebted the most to the two people who daily manifest their care for me: my mother and Sai. Obrigado, mamã, pelo teu carinho e apoio. Orgulho-me de ser teu filho! Lieve Sai, jouw aanwezigheid maakt me gelukkig! 我愛你。 Table of contents iii Table of contents Acknowledgements ................................................................................................................... i Table of contents ..................................................................................................................... iii List of tables ............................................................................................................................ vii List of