Indirect Benefits of Financial Globalization: Evidence from Small Firms’ Growth Opportunities

48 Pages Posted: 2 Feb 2016 Last revised: 30 Jan 2017

See all articles by Dong Wook Lee

Dong Wook Lee

Korea University

Lingxia Sun

Sun Yat-sen University (SYSU) - ISBF; Nankai University - Business School; Korea University Business School (KUBS)

Date Written: January 25, 2017


This paper measures the indirect impacts of financial globalization using the extent to which corporate growth opportunities — especially those of small-size companies — are country-specific. Using data for 53,365 firms from 40 countries over the period of 1991-2012, we find that the country-specific growth opportunities (CSGOs) decrease with financial openness, both across countries and within a country over time. The reduction in CSGOs is much more pronounced in small firms than in large companies. On the other hand, the country-neutral and industry-specific growth opportunities (ISGOs) increase with financial openness, again mostly for small firms. With the progress of financial globalization, small firms also invest more in line with the ISGOs and less with the CSGOs than before. Considering that small-size companies are denied direct access to foreign capital but are subject to various changes in domestic institutions brought by financial globalization, our results support the notion of indirect impacts of financial globalization. Moreover, the results suggest that those impacts are beneficial, as small firms’ growth opportunities and investments are better aligned with economic fundamentals.

Keywords: Financial globalization; Indirect benefits; Firm size; Growth opportunities

JEL Classification: F30, F65, G30

Suggested Citation

Lee, Dong Wook and Sun, Lingxia, Indirect Benefits of Financial Globalization: Evidence from Small Firms’ Growth Opportunities (January 25, 2017). Available at SSRN: or

Dong Wook Lee (Contact Author)

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)
+82.2.3290.2820 (Phone)
+82.2.3290.1307 (Fax)

Lingxia Sun

Sun Yat-sen University (SYSU) - ISBF ( email )

Tangjiawan, Zhuhai Campus
Zhuhai, Guangdong 519082

Nankai University - Business School ( email )

94 Weijin Road, Nankai District
Tianjin, 300071

Korea University Business School (KUBS) ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701

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