Global Market Dynamics: The Impact of Home Country Macro-Institutional Quality on NYSE-Listed Non-U.S. Stocks

We investigate liquidity and information asymmetry for a sample of non-U.S. stocks in the NYSE. Using the Worldwide Governance Indicators (WGI), we find that liquidity and information asymmetry measures for non-U.S. stock listings are significantly related to the macro-institutional quality of their home countries such as political risk and absence of violence/terrorism, government effectiveness, voice and accountability, control of corruption, and rule of law. We find non-U.S. stocks from countries with lower institutional quality metrics tend to have lower liquidity and higher information asymmetry. Therefore, improving the institutional quality of a country alleviates information problems and improves market liquidity for non-U.S. stocks listed on the NYSE.