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

Review of Finance, 2013, 17, pp. 1571-1615.

AFA 2009 San Francisco Meetings Paper

57 Pages Posted: 28 Aug 2007 Last revised: 17 Jun 2014

Todd A. Gormley

Washington University in St. Louis

Radhakrishnan Gopalan

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

Date Written: August 28, 2012

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.

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

JEL Classification: G01, G20, O16, E44

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: https://ssrn.com/abstract=1010116 or http://dx.doi.org/10.2139/ssrn.1010116

Todd A. Gormley (Contact Author)

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
(314) 935-7171 (Phone)

HOME PAGE: http://www.gormley.info

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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