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On the Growth Effect of Stock Market Liberalizations

Posted: 8 Dec 2009  

Nandini Gupta

Indiana University - Kelley School of Business - Department of Finance

Kathy Yuan

London School of Economics & Political Science (LSE) - Department of Finance

Date Written: November 2009

Abstract

We investigate the effect of a stock market liberalization on industry growth in emerging markets. Consistent with the view that liberalization reduces financing constraints, we find that industries that are more externally dependent and face better growth opportunities grew faster following liberalization. However, this growth increase appears to come from an expansion in the size of existing firms rather than through the entry of financially constrained new firms. We show that following liberalization, new firm growth occurs in countries and industries with lower entry barriers. Hence, liberalization has a more uniform growth impact if accompanied by competition-enhancing reforms.

JEL Classification: E32, F30, F36, F43, G15, G18, G28

Suggested Citation

Gupta, Nandini and Yuan, Kathy, On the Growth Effect of Stock Market Liberalizations (November 2009). The Review of Financial Studies, Vol. 22, Issue 11, pp. 4715-4752, 2009. Available at SSRN: https://ssrn.com/abstract=1519265 or http://dx.doi.org/hhp001

Nandini Gupta (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3416 (Phone)
812-855-5875 (Fax)

Kathy Zhichao Yuan

London School of Economics & Political Science (LSE) - Department of Finance ( email )

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Houghton Street
London, London WC2A 2AE
United Kingdom
+44 (0)20 7955 6407 (Phone)
+44 (0)20 7849 4647 (Fax)

HOME PAGE: http://fmg.lse.ac.uk/~kathy

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