Do Small Firms Benefit More from Foreign Portfolio Investment? Evidence from a Natural Experiment

41 Pages Posted: 17 Mar 2009

See all articles by Tanakorn Makaew

Tanakorn Makaew

Securities and Exchange Commission (SEC)

Multiple version iconThere are 2 versions of this paper

Date Written: March 16, 2009

Abstract

We analyze the stock market impact of Thailand's unique restriction on portfolio capital inflows. The Thai government imposed a very stringent capital control on December 19, 2006 and then quickly abandoned it on December 20, 2006. While many other studies have been plagued with the difficulty of separating the impact of foreign capital from the impact of other concurrent events, this natural experiment helps us alleviate the time-series identification problem. Our results suggest that foreign portfolio investment helps large firms more, contrary to existing evidence which finds a benefit of foreign portfolio investment for small firms. We also investigate the importance of other firm characteristics correlated with size including a firm's exchange rate exposure, foreign ownership, and political connection.

Keywords: foreign portfolio investment, small firms, liberalization, capital control, emerging markets

JEL Classification: F32, G15, G18

Suggested Citation

Makaew, Tanakorn, Do Small Firms Benefit More from Foreign Portfolio Investment? Evidence from a Natural Experiment (March 16, 2009). Available at SSRN: https://ssrn.com/abstract=1360914 or http://dx.doi.org/10.2139/ssrn.1360914

Tanakorn Makaew (Contact Author)

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

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