We attempt to answer the following key questions: What are the revaluation effects and the impacts on the cost of capital, volatility, and correlation with world market returns from stock market liberalization in emerging market countries? These questions have been studied extensively at the market-level, i.e. using country indices, but not at the firm level. In the market-level analysis, there is increasing concern whether the country indices are proper means to answer those questions, for example they may not represent the real holdings of foreign portfolio investors after liberalization. Indeed, foreign portfolio investors are known to prefer investment in large and well-known firms. Hence, the opening of capital markets should have a differential impact across securities depending on foreign investors' demand. In order to take into account the potentially different impacts caused by foreign investors' demand, we use individual firm data as well as market-level indices. Our analysis is based on the cross-sectional and time-series panel regression method. / Our test results using country indices show statistically and economically significant revaluation effects, and increases in the cost of capital. While the stock market volatility increases, its correlation with world market return does not change after stock market liberalization. More important than these market-level findings, we report significantly different impacts of stock market liberalization, based on firm size, which is used as a proxy for foreign investors' demand. Large firms tend to exhibit large revaluation effects, insignificant change in the cost of capital, small increases in volatility, and increases in correlation with the world market from liberalization. Small firms show small revaluation effects, increases in the cost of capital, large increases in volatility and decreases in correlation with world market returns after liberalization. Our results have important implications for international investors seeking to manage their global exposure as well as for policy makers considering capital market liberalization.

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This dissertation examines the relationship between political institutions and development policies across a wide array of policy arenas. It consists of three essays. In the first essay, I examine how corruption in political institutions affects citizens’ attitudes towards proposed policy reforms that should yield long-run benefits. I argue that where corruption in political institutions reduces citizens’ benefits from existing programs, governmental promises to deliver benefits via reforms are less credible. Thus, citizens will cling to inefficient policies not because they are unable to recognize the benefits of reform but because they do not trust political institutions to implement reforms in ways that will benefit them in practice. I use this logic to explain why citizens frequently resist attempts to reform the economically and environmentally costly practice of setting domestic gasoline prices below market prices. To reveal these patterns, I rely on original survey and administrative data from Indonesia. The second essay maintains the focuses on the quality of political institutions and natural resource governance but from a more macro perspective. In this essay, I argue that political regimes and political time horizons shape financial arrangements between governments and multinational oil companies. This essentially asks the reverse of a central question in comparative politics. Rather than asking how oil income affects political institutions, I ask how political institutions motivate politicians to make policy choices that increase or decrease the government’s access to oil income over time. To do so, I utilize an original dataset on financial arrangements between host countries and multinational oil companies, as reflected in historically confidential oil contracts. The final essay travels to a different substantive area of development policy, yet allows for a critical role for political institutions. This essay argues that the relationship between developing country governments and foreign aid donors should be conditional on the quality of political institutions, with aid donors giving countries with institutions better able to commit to selecting policies that promote development wider latitude to direct foreign aid resources towards local priorities. Instead, I find that political and security alliances shape whether donors give developing country governments more “ownership” over aid flows. Overall, the dissertation deepens understanding of the relationship between the quality of political institutions and policies within developing countries, while offering insights into contemporary policy debates about natural resource governance, environmental politics, and development aid.