Suppliers, Investors, and Equity Market Liberalizations

35 Pages Posted: 3 Nov 2011 Last revised: 28 Sep 2017

Multiple version iconThere are 2 versions of this paper

Date Written: March 20, 2017

Abstract

Allowing foreign investors to acquire equity stakes in domestic firms stimulates the real economy by promoting frictionless relationships between buyers and suppliers of intermediate goods. I combine insights from research on financial liberalization and relationship-specific investment to derive this hypothesis and then use a difference-in-difference empirical framework to test it. Results from panel-data and event-study estimations confirm that equity market liberalizations boost output growth particularly in suppliers-dependent industries that require a high share of specialized inputs in their production process. Financial openness can thus facilitate smooth interactions between firms and an important corporate stakeholder - suppliers of crucial production inputs.

Keywords: corporate stakeholders; equity market liberalizations; finance and real economy

JEL Classification: G15, G30, F36

Suggested Citation

Strieborny, Martin, Suppliers, Investors, and Equity Market Liberalizations (March 20, 2017). Available at SSRN: https://ssrn.com/abstract=1952908 or http://dx.doi.org/10.2139/ssrn.1952908

Martin Strieborny (Contact Author)

Lund University ( email )

P.O. Box 7082
S-220 07 Lund
Sweden

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