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, with aggregate domestic trading activity being 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.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11894.
Length: Date of creation: Dec 2005 Date of revision: Handle: RePEc:nbr:nberwo:11894
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Find related papers by JEL classification: G15 - Financial Economics - - General Financial Markets - - - International Financial Markets F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration F20 - International Economics - - International Factor Movements and International Business - - - General
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