Institutionalization of Capital and the Changing Role of Public Equity Markets: International Evidence

52 Pages Posted: 3 Jun 2017 Last revised: 12 Nov 2017

See all articles by Ivalina Kalcheva

Ivalina Kalcheva

University of California, Riverside

Janet Kiholm Smith

Claremont McKenna College - Robert Day School of Economics and Finance

Richard L. Smith

University of California, Riverside - Anderson Graduate School of Management

Date Written: September 1, 2017

Abstract

We study the relation between institutionalization of capital and the reliance on public markets by corporations and investors. Country-level evidence indicates that capital under institutional management (ownership by mutual funds, pension funds, and insurance companies) is negatively related to the levels and growth rates of numbers of publicly listed companies and also negatively related to the levels and growth rates of aggregate market capitalization and trading activity on public equity markets. The results indicate that, as economies mature and direct ownership of equity by retail investors declines, financial systems move in the direction of being less public market-centric to more institution-centric.

Keywords: Mutual funds, Pension funds, Public listings, Trading volume, Market capitalization Institutional investors, Financial liberalization, Economic development

JEL Classification: G15, G18, G23, 016, O19, O43

Suggested Citation

Kalcheva, Ivalina and Smith, Janet Kiholm and Smith, Richard L., Institutionalization of Capital and the Changing Role of Public Equity Markets: International Evidence (September 1, 2017). Claremont McKenna College Robert Day School of Economics and Finance Research Paper No. 2979490. Available at SSRN: https://ssrn.com/abstract=2979490 or http://dx.doi.org/10.2139/ssrn.2979490

Ivalina Kalcheva

University of California, Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States

Janet Kiholm Smith

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-3276 (Phone)

Richard L. Smith (Contact Author)

University of California, Riverside - Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States
951-827-3554 (Phone)

HOME PAGE: http://www.agsm.ucr.edu/

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