Size Matters: The Impact of Capital Market Liberalization on Individual Firms

McGill Finance Research Centre Working Paper

29 Pages Posted: 31 Aug 2003

See all articles by Peter Christoffersen

Peter Christoffersen

University of Toronto - Rotman School of Management; Copenhagen Business School; Aarhus University - CREATES

Hyunchul Chung

Hanyang University-School of Business

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Date Written: September 6, 2002

Abstract

We attempt to answer the following questions: What are the revaluation effects and the impact on performance, volatility, and return correlation from stock market liberalization in emerging markets? These questions have been studied extensively at the market-level but not at the firm level. Our results show significantly different impact of stock market liberalization across firms. Large firms tend to exhibit large revaluation effects, insignificant change in performance, large declines in volatility, and insignificant change in correlation from liberalization. Small firms show small revaluation effects, improved performance, smaller decline in volatility and decreases in correlation after liberalization. These results hold after controlling for movements in world stock returns, concurrent economic reforms and macroeconomic fundamentals. They are also robust to the length of the liberalization window. Our results have important implications for international investors seeking to manage their global exposure as well as for policy makers considering capital market liberalization.

Keywords: Revaluation effects, performance, volatility, correlation

JEL Classification: F36 G15

Suggested Citation

Christoffersen, Peter and Chung, Hyunchul and Errunza, Vihang R., Size Matters: The Impact of Capital Market Liberalization on Individual Firms (September 6, 2002). McGill Finance Research Centre Working Paper. Available at SSRN: https://ssrn.com/abstract=329220 or http://dx.doi.org/10.2139/ssrn.329220

Peter Christoffersen (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5P 3C4
Canada
416-946-5511 (Phone)

Copenhagen Business School

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Aarhus University - CREATES

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

Hyunchul Chung

Hanyang University-School of Business ( email )

222 Wangsimni-ro, Seongdong-gu
Seoul, 133-791
Korea, Republic of (South Korea)

Vihang R. Errunza

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-4056 (Phone)
514-398-3876 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
168
Abstract Views
1,674
rank
184,199
PlumX Metrics