A Closer Look at the Effects of Equity Market Liberalization in Emerging Markets

42 Pages Posted: 27 Jun 2013 Last revised: 10 Aug 2017

See all articles by R. David McLean

R. David McLean

Georgetown University - Department of Finance

Jeffrey Pontiff

Boston College - Department of Finance

Mengxin Zhao

Securities and Exchange Commission (SEC)

Date Written: August 9, 2017

Abstract

Previous studies link equity market liberalization to economic growth in emerging markets. In the 24 emerging markets that we study, liberalizations always coincide with other economic reforms, making identification difficult. Theories linking liberalization to growth predict that at the firm-level, liberalization leads to significant foreign ownership and influence on management, more external finance, and higher investment. Using firm-level data, we find no evidence supporting these theories. Our findings suggest that either equity market liberalization does not cause growth, or that it promotes growth through an indirect channel that is overlooked in the current literature.

Keywords: Liberalization, Equity Issuance, Financial Constraints, Capital Raising

JEL Classification: F00, G30, G24

Suggested Citation

McLean, R. David and Pontiff, Jeffrey and Zhao, Mengxin, A Closer Look at the Effects of Equity Market Liberalization in Emerging Markets (August 9, 2017). Available at SSRN: https://ssrn.com/abstract=2285470 or http://dx.doi.org/10.2139/ssrn.2285470

R. David McLean

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC Washington DC 20057
United States

Jeffrey Pontiff (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Mengxin Zhao

Securities and Exchange Commission (SEC) ( email )

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

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