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Internationalization and Stock Market Liquidity

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Author Info
Ross Levine
Sergio L. Schmukler

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Abstract

What is the impact of internationalization (firms raising capital and trading in international markets) on the liquidity of the remaining firms in domestic markets? To address this question, we assemble a panel database of nearly 2,900 firms from 45 emerging economies over the period 1989-2000, constructed from annual and daily data. First, we find evidence of migration. The domestic trading of firms that cross-list or issue depositary receipts in foreign public exchanges tends to decrease, while a significant proportion of their trading activity concentrates in international markets. Second, this migration is negatively related to the liquidity of the remaining firms in their home market through two separate channels. There are liquidity spillovers within markets: Aggregate domestic trading activity is positively associated with the liquidity of individual firms in the same market. Moreover, the proportion of trading abroad is negatively related to the liquidity of firms in the domestic market. Copyright 2006, Oxford University Press.

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File URL: http://hdl.handle.net/10.1007/s10679-006-6981-7
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Publisher Info
Article provided by Oxford University Press for European Finance Association in its journal Review of Finance.

Volume (Year): 10 (2006)
Issue (Month): 1 ()
Pages: 153-187
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Handle: RePEc:oup:revfin:v:10:y:2006:i:1:p:153-187

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  1. Claessens, Stijn & Schmukler, Sergio, 2007. "International Financial Integration through Equity Markets: Which Firms from Which Countries Go Global?," CEPR Discussion Papers 6137, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Do, Quy-Toan & Levchenko, Andrei A., 2006. "Comparative advantage, demand for external finance, and financial development," Policy Research Working Paper Series 3889, The World Bank. [Downloadable!]
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  3. Foucault, Thierry & Gehrig, Thomas, 2006. "Stock Price Informativeness, Cross-Listings and Investment Decisions," CEPR Discussion Papers 5722, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Levy Yeyati, Eduardo & Schmukler, Sergio L. & Van Horen, Neeltje, 2006. "International financial integration through the law of one price," Policy Research Working Paper Series 3897, The World Bank. [Downloadable!]
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  5. Bekaert, Geert & Harvey, Campbell & Lundblad, Christian T., 2006. "Liquidity and Expected Returns: Lessons from Emerging Markets," CEPR Discussion Papers 5946, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Giannetti, Mariassunta & Yu, Xiaoyun, 2007. "Favouritism or Markets in Capital Allocation?," CEPR Discussion Papers 6124, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2006. "Internationalization and the evolution of corporate valuation," Policy Research Working Paper Series 3933, The World Bank. [Downloadable!]
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  8. de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007. "Capital market development : whither Latin America ?," Policy Research Working Paper Series 4156, The World Bank. [Downloadable!]
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  9. Alberto Chong & Florencio Lopez-de-Silanes, 2007. "Corporate Governance in Latin America," RES Working Papers 4494, Inter-American Development Bank, Research Department. [Downloadable!]
  10. Yeyati, Eduardo Levy & Schmukler, Sergio L. & Van Horen, Neeltje, 2008. "Crises, capital controls, and financial integration," Policy Research Working Paper Series 4770, The World Bank. [Downloadable!]
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  11. Alberto Chong & Florencio Lopez-de-Silanes, 2007. "Gobierno Corporativo en América Latina," RES Working Papers 4495, Inter-American Development Bank, Research Department. [Downloadable!]
  12. Juan Carlos Gozzi & Ross Levine & Sergio L. Schmukler, 2009. "Patterns of International Capital Raisings," NBER Working Papers 14961, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Yeyati, Eduardo Levy & Schmukler, Sergio L. & Van Horen, Neeltje, 2007. "Emerging market liquidity and crises," Policy Research Working Paper Series 4445, The World Bank. [Downloadable!]
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  14. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2006. "The Effect of Corporate Break-ups on Information Asymmetry: A Market Microstructure Analysis," MPRA Paper 13155, University Library of Munich, Germany, revised 26 Oct 2008. [Downloadable!]
  15. de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007. "Stock market development under globalization : whither the gains from reforms ?," Policy Research Working Paper Series 4184, The World Bank. [Downloadable!]
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