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Financial Markets And The Allocation Of Capital

Jeffrey Wurgler

NYU Stern School of Business; National Bureau of Economic Research (NBER)

July 1999

Yale ICF Working Paper No. 99-08

Financial markets appear to improve the allocation of capital--across 65 countries, those with developed financial markets increase investment more in growing industries, and decrease investment more in declining industries, than financially undeveloped countries. The efficiency of capital allocation is also negatively correlated with the extent of state ownership in the economy, and positively correlated with the degree of firm-specific movement in domestic stock returns and the legal protection of investors (which appears to be particularly useful for limiting investment in declining industries).

Number of Pages in PDF File: 40

JEL Classification: E22, G20, N20

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Date posted: August 19, 1999  

Suggested Citation

Wurgler, Jeffrey, Financial Markets And The Allocation Of Capital (July 1999). Yale ICF Working Paper No. 99-08. Available at SSRN: https://ssrn.com/abstract=171921 or http://dx.doi.org/10.2139/ssrn.171921

Contact Information

Jeffrey A. Wurgler (Contact Author)
NYU Stern School of Business ( email )
Stern School of Business
44 West 4th Street, Suite 9-190
New York, NY 10012-1126
United States
212-998-0367 (Phone)
212-995-4233 (Fax)
HOME PAGE: http://www.stern.nyu.edu/~jwurgler/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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