Capitalism and (versus?) democracy: stock markets and democratization in transition

This article takes a look at the determinants of democracy in transition economies, with reference to the role of financial markets. Using three different proxies for financial market development, I find that stock exchanges appear to correlate with lower levels of democracy on average, although the most successful democracies also have the largest stock markets. Nonlinearities thus appear to exist in the relationship between financial markets and political institutions in transition.