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

41 Pages Posted: 26 May 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: March 30, 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, Levine and Schmukler 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.

This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the effects of financial globalization.

Keywords: International finance, globalization, cross-listing, ADRs, GDRs

JEL Classification: G15, F36, F20

Suggested Citation

Levine, Ross Eric and Schmukler, Sergio, Migration, Spillovers, and Trade Diversion: The Impact of Internationalization on Stock Market Liquidity (March 30, 2003). World Bank Policy Research Working Paper Series. Available at SSRN: https://ssrn.com/abstract=405540

Ross Eric Levine (Contact Author)

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

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sergio Schmukler

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

1818 H. Street, N.W.
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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