Equity Market Liberalization, Industry Growth And The Cost Of Capital
AbstractThis paper examines whether equity market liberalization facilitates economic growth at the industry level. It also explores whether equity market liberalization reduces the cost of capital by scrutinizing a particular mechanism: that liberalization reduces the wedge between the costs of external and internal capital to firms. Using industry-level data on 19 emerging markets and 18 developed countries for the period between 1980-2000, we find a uniform increase in the growth rate of real value added across industries following liberalization in emerging markets. Industries highly dependent on external finance grow faster in liberalized regimes. No additional growth effects are found for industries dependent more on equity finance in emerging markets.
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Bibliographic InfoArticle provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.
Volume (Year): 35 (2010)
Issue (Month): 3 (September)
Equity Market Liberalization; Growth; Cost of Capital; External Finance Dependence;
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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