Importance of Politics in the Reform of Capital Markets: Case Study of the Egyptian Capital Market

Financial development has proved to be a perfect indicator and reliable proxy for economic growth. Capital Finance is one of the main vehicles of finance. Capital markets, as Thorsten Beck and Ross Levine showed empirically, can solely and independently lead to economic growth. The consensus about the importance of financial markets and, particularly, the role that capital markets play in modern economies, did not coincide with similar development patterns in capital market regulations and institutions in developed countries and elsewhere. Some developed countries continue to have weak capital markets, and other developing countries are struggling to construct theirs. This fact propelled many to question why some developed countries continue to have weaker capital markets, why legal and extra-legal institutions are efficient in some countries but not in others, and why some countries do not reform these institutions. These are questions of institutional performance and evolution, and why institutions perform differently in different countries. Nonetheless, this paper is only