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Do Public Equity Markets Matter in Emerging Economies? Evidence from India


Todd A. Gormley


University of Pennsylvania - The Wharton School

Radhakrishnan Gopalan


Washington University in Saint Louis - John M. Olin Business School

August 28, 2012

Review of Finance, 2013, 17, pp. 1571-1615.
AFA 2009 San Francisco Meetings Paper

Abstract:     
Do public equity markets serve a unique role that is not easily served by other forms of financing in emerging economies? We analyze this question using the collapse of India's equity market in 1997, which provides an exogenous shock to firms' ability to issue equity. We find that both public and private firms exhibit higher bankruptcy rates and lower growth after 1997. The decline in growth is greater among firms with more external finance needs and less tangible assets. Overall, the evidence suggests that public equity markets are an important, not easily replaced, source of finance in emerging economies.

Number of Pages in PDF File: 57

Keywords: Public Equity Markets, Emerging Economies, Crises, India

JEL Classification: G01, G20, O16, E44

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Date posted: August 28, 2007 ; Last revised: June 17, 2014

Suggested Citation

Gormley, Todd A. and Gopalan, Radhakrishnan, Do Public Equity Markets Matter in Emerging Economies? Evidence from India (August 28, 2012). Review of Finance, 2013, 17, pp. 1571-1615.; AFA 2009 San Francisco Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1010116 or http://dx.doi.org/10.2139/ssrn.1010116

Contact Information

Todd A. Gormley (Contact Author)
University of Pennsylvania - The Wharton School ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
(314) 313-4330 (Phone)
HOME PAGE: http://apps.olin.wustl.edu/faculty/Gormley/

Radhakrishnan Gopalan
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
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