A Closer Look at the Effects of Equity Market Liberalization in Emerging Markets
42 Pages Posted: 27 Jun 2013 Last revised: 10 Aug 2017
Date Written: August 9, 2017
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: Suggested Citation