Capital Inflows, Equity Issuance Activity, and Corporate Investment

55 Pages Posted: 26 Mar 2018

See all articles by Charles W. Calomiris

Charles W. Calomiris

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Mauricio Larrain

Columbia University

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

Abstract

We use issuance-level data to study how equity capital inflows that enter emerging market economies affect equity issuance and corporate investment. We show that foreign inflows are strongly correlated with country-level issuance. The relation reflects the behavior of large issuers issuing in domestic equity markets and that of firms issuing in international markets. Those larger, more liquid, and highly valued firms are the ones more likely to raise equity when their country receives capital inflows. To identify supply-side shocks, we instrument capital inflows into each country with exogenous changes in other countries’ attractiveness to foreign investors. Shifts in the supply of foreign capital are important drivers of increased equity inflows. Instrumented inflows lead a subset of firms (large domestic issuers and foreign issuers) to raise new equity, which they use mainly to fund investment. Corporate investment increases between one-tenth and four-tenths the amount of foreign equity capital entering the country.

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Suggested Citation

Calomiris, Charles W. and Larrain, Mauricio and Schmukler, Sergio, Capital Inflows, Equity Issuance Activity, and Corporate Investment (March 2018). NBER Working Paper No. w24433. Available at SSRN: https://ssrn.com/abstract=3149258

Charles W. Calomiris (Contact Author)

Columbia University - Columbia Business School ( email )

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National Bureau of Economic Research (NBER)

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Mauricio Larrain

Columbia University ( email )

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New York, NY 10027
United States

Sergio Schmukler

World Bank - Development Research Group (DECRG) ( email )

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MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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