Institutionalization of Capital and the Changing Role of Public Equity Markets: International Evidence
52 Pages Posted: 3 Jun 2017 Last revised: 12 Nov 2017
Date Written: September 1, 2017
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
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