Do Public Equity Markets Matter in Emerging Economies? Evidence from India
Todd A. Gormley
University of Pennsylvania - The Wharton School
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
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
Date posted: August 28, 2007 ; Last revised: June 17, 2014
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