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

41 Pages Posted: 19 Mar 2011 Last revised: 19 Mar 2012

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 15, 2011

Abstract

We analyze the stock market impact of Thailand's unique restriction on portfolio capital in flows. The Thai government imposed a very stringent capital control on December 19, 2006 and then quickly abandoned it on December 20, 2006. This experiment helps us separate the impact of foreign capital from the impact of other concurrent events and hence alleviates 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 fraction, and political connection.

JEL Classification: F32, G15, G18

Suggested Citation

Makaew, Tanakorn, Do Small Firms Benefit More from Foreign Portfolio Investment? Evidence from a Natural Experiment (March 15, 2011). Available at SSRN: https://ssrn.com/abstract=1787376 or http://dx.doi.org/10.2139/ssrn.1787376

Tanakorn Makaew (Contact Author)

Securities and Exchange Commission (SEC) ( email )

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

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