Article: The moderating effect of public governance on the relationship between corporate governance and stock market development Journal: International Journal of Business Governance and Ethics (IJBGE) 2025 Vol.19 No.6 pp.671 - 703 Abstract: This study tests the moderating effect of public governance on the association between corporate governance and stock market development. The sample size was 540 country-year records (54 countries × 10 years), and GMM and Threshold regression analysis were run. The findings confirm that corporate governance is a significant predictor of stock market development in terms of both size and liquidity. Stock markets develop with strong auditing and reporting standards, strong shareholder protection, and efficient corporate boards. Moderation effect analyses indicate that corporate governance and public governance are sometimes substitutes and sometimes complement each other depending on the type of stock market development proxy. The complementary effect implies that corporate governance and public governance should co-exist, whereas substitutive effect suggests that corporate governance is influential and sufficient in case of weak public regulatory quality. Policymakers can configure regulatory framework, corporate governance codes and market-related regulations to stimulate investment in stock markets. Inderscience Publishers - linking academia, business and industry through research

Title: The moderating effect of public governance on the relationship between corporate governance and stock market development

Authors: Ali Uyar; Cemil Kuzey; Mondher Bouattour

Addresses: Excelia Business School, 102 rue de Coureilles – Les Minimes, 17024 La Rochelle Cedex 1, France ' Computer Science and Information Systems, Arthur J. Bauernfeind College of Business, Murray State University, Murray, KY, USA ' Excelia Business School, 102 rue de Coureilles – Les Minimes, 17024 La Rochelle Cedex 1, France; LGTO (URU – 7416), 129A Avenue de Rangueil, 31077 Toulouse, France

Abstract: This study tests the moderating effect of public governance on the association between corporate governance and stock market development. The sample size was 540 country-year records (54 countries × 10 years), and GMM and Threshold regression analysis were run. The findings confirm that corporate governance is a significant predictor of stock market development in terms of both size and liquidity. Stock markets develop with strong auditing and reporting standards, strong shareholder protection, and efficient corporate boards. Moderation effect analyses indicate that corporate governance and public governance are sometimes substitutes and sometimes complement each other depending on the type of stock market development proxy. The complementary effect implies that corporate governance and public governance should co-exist, whereas substitutive effect suggests that corporate governance is influential and sufficient in case of weak public regulatory quality. Policymakers can configure regulatory framework, corporate governance codes and market-related regulations to stimulate investment in stock markets.

Keywords: public governance; regulatory quality; corporate governance; stock market development; complementary effect; substitutive effect.

DOI: 10.1504/IJBGE.2025.149822

International Journal of Business Governance and Ethics, 2025 Vol.19 No.6, pp.671 - 703

Accepted: 05 Sep 2023
Published online: 14 Nov 2025 *

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Title: The moderating effect of public governance on the relationship between corporate governance and stock market development

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