Financial Development, Internationalisation and Firm Value
44 Pages Posted: 9 Jan 2011
Date Written: January 9, 2011
In this paper I show that both aspects of financial development, namely liberalisation and deepening, and financial internationalisation proxied using cross listings in the U.S. creates value for emerging market firms. Financial deepening, or more precisely, stock market deepening enhances value. In contrast, bank sector deepening only serves to reduce value, because it is associated with large-scale corporate expansion and a fall in market capitalisations. Like others, I document a cross-listing premium for Level 2/3 cross-listings in the U.S. The cross-listing premium is typically less than the gains from financial liberalisation, but they are similar in magnitude over the period examined.
Keywords: Financial Liberalisation, Financial Deepening, Internationalisation, Tobin’s q
JEL Classification: G15, F36
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