Topics: Money market, Economics, Stock market Pages: 25 (7365 words) Published: December 28, 2013


Stock markets play a crucial role in global economics and corporate finance where the financial markets generate finance for the economic growth of the country. Pakistan has three stock exchanges, Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE), whereas, Bangladesh has two stock exchanges,Dhaka Stock Exchange (DSE),Chittagong Stock Exchange(CSE). Stock exchange of a country is the financial institution that deals with financial instruments.

It was important to answer the increasing number of the critical questions regarding stock market performance and economic growth, for instance, do the stock exchanges of the countries affect on the economic growth of a country, if yes then how? This study highlights certain factors that can be used to measure the stock market development and its effect on the country’s economic growth. Besides this, it was important to study the effect of increasing market capitalization of both Pakistan and Bangladesh on their economic growth.

Ruggiero (2001) intended that the people’s perception about the rising or falling stock markets is different, that is, people feel wealthier as it goes up and feel poorer as it goes down. On the other side, Levine (1996) stated that the liquid stock markets effect can be negative because of the two major reasons, that is, large numbers of investors sell their stocks in the market and lack of corporate control on the performance of a firm.

This study analyses the effect of Pakistan and Bangladesh stock market development on their respective GDP per capita by considering three of the stock market indicators, that is, market capitalization, total value of stocks traded, stock turnover ratio and lastly total number of listed companies.

1.2 Objectives

i. To investigate the effect of stock markets development on the economic growth of Pakistan. ii. To examine the effect of stock markets development on the economic growth of Bangladesh. iii. To compare the stock markets development and economic growth of Pakistan and Bangladesh.

1.3 Rationale of the Study
Due to recent instability in the stock market of Bangladesh, improvement of legal framework is necessary for the proper function of the market. During the study, some basic features of the market will be compared with the stock market of the PAKISTAN, one of the strongest stock market of the world. Therefore, the rationale of taking this study is to propose some recommendations on the basis of the stock market of the PAKISTAN.

1.4 Methodology

The study is based on a qualitative survey research. Though both primary and secondary data are used in the study, it is mainly based on secondary data. The study prefers comparative approach, makes a comparison between the security market related laws in Bangladesh with those of PAKISTAN, and tries to present certain recommendations by improving legal framework to provide better atmosphere in the stock market of Bangladesh.

1.5 Limitation of the Study

The present study tries to address the obstacles that hamper the growth of stock market in Bangladesh and to discuss about the ways of improvement as well as to look up the legal mechanisms of stock market of Bangladesh and the PAKISTAN. Finally, it tries to improve the legal framework of the stock market of Bangladesh within the context of the present market structure and the regulations the PAKISTAN.

To do the study it was realized that, the books and publications relating to regulatory framework of stock market of Bangladesh are rare and are not easily assessable. Moreover, the data used in these sources are not properly updated although stock market related regulations are changing almost every day.

Regulating the stock market is a complicated process. There are a number of regulations for the governing of the stock markets of Bangladesh. Due to limitation of time, this...

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