Migration, Spillovers,And Trade Diversion: The Impact of Internationalization on Stock Market Liquidity

42 Pages Posted: 11 Apr 2003

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2003

Abstract

What is the impact of firms that cross-list, issue depositary receipts, or raise capital in international stock markets on the liquidity of remaining firms in domestic markets? Using a panel of over 3,200 firms from 55 countries during 1989-2000, we find that internationalization reduces the liquidity of domestic firms through two channels. First, the trading of international firms migrates from domestic to international markets and the reduction in domestic liquidity of international firms has negative spillover effects on domestic firm liquidity. Second, there is trade diversion within domestic markets as liquidity shifts out of domestic firms and into international firms.

Suggested Citation

Levine, Ross Eric and Schmukler, Sergio, Migration, Spillovers,And Trade Diversion: The Impact of Internationalization on Stock Market Liquidity (April 2003). NBER Working Paper No. w9614. Available at SSRN: https://ssrn.com/abstract=394722

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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National Bureau of Economic Research (NBER)

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Sergio Schmukler

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

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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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