Literature Review

This chapter offers a review of the relevant theoretical foundation and existing empirical evidence upon which this study is based. The chapter is divided into four topical sections.

The first section introduces the performance characteristics of emerging equity markets, which help explain the subsequent theoretical review relating to market liberalisation and integration. While findings from several emerging markets are included, the focus remains on equity markets in European transition economies. In addition to a review of definitions and theories around market liberalisation and market integration, section two also describes the main conclusions on liberalisation and integration effects on financial markets. The third section reviews the area of regional market integration and introduces studies relating to the macroeconomic effects of the EU enlargement. The fourth section explores theory and associated empirical evidence of an area linked to the EU accession preparations, namely corporate governance and how it is linked to equity performance characteristics.