Abstract
This study explores the relationship between political stability, government effectiveness and corruption on stock market performance using the panel VECM model for South Asian countries from 1989 to 2015. In order to determine, the directional relationship, the Granger Causality test is being employed; however, Impulse response functions and forecast error variance decomposition are used to assess the stability of the relationship among projected variables over the time. Study findings suggest a strong positive relationship between control of corruption, government effectiveness, political stability and stock market performance. Policy recommendation for the South Asian nations could be condensed i.e. control on corruption, enhance government effectiveness, keep away from frequencies of violence and political instability that send wrong flags to universal investors, and keep up sound regulation quality. The most significant contribution of the study is its emphasis on quality of governance determinants and stock market performance of the South Asian economies.