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

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  • Ross Levine
  • Sergio L. Schmukler

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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9614.

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Date of creation: Apr 2003
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Publication status: published as Levine, Ross and Sergio L. Schmukler. "Internationalization And Stock Market Liquidity," Review of Finance, 2006, v10(Mar), 153-187.
Handle: RePEc:nbr:nberwo:9614

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Cited by:
  1. Olatundun Janet Adelegan, 2009. "The Impact of the Regional Cross-Listing of Stockson Firm Value in Sub-Saharan Africa," IMF Working Papers 09/99, International Monetary Fund.
  2. Beck, Thorsten, 2006. "Creating an efficient financial system : challenges in a global economy," Policy Research Working Paper Series 3856, The World Bank.
  3. Menzie D. Chinn & Hiro Ito, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," NBER Working Papers 11370, National Bureau of Economic Research, Inc.
  4. International Monetary Fund, 2008. "Can Regional Cross-Listings Accelerate Stock Market Development? Empirical Evidence From Sub-Saharan Africa," IMF Working Papers 08/281, International Monetary Fund.
  5. Eduardo Levy Yeyati & Sergio Schmukler & Neeltje van Horen, 2003. "The Price of Inconvertible Deposits: The Stock Market Boom during the Argentine crisis"," Business School Working Papers diez, Universidad Torcuato Di Tella.
  6. Beck, T.H.L. & Demirgüc-Kunt, A. & Laeven, L. & Levine, R., 2008. "Finance, firm size and growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3132808, Tilburg University.
  7. Sakho, Yaye Seynabou, 2006. "Contagion and firms'internationalization in Latin America : evidence from Mexico, Brazil, and Chile," Policy Research Working Paper Series 4076, The World Bank.
  8. Kristin J. Forbes, 2005. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Working Papers 11372, National Bureau of Economic Research, Inc.
  9. Do, Quy-Toan & Levchenko, Andrei A., 2004. "Trade and financial development," Policy Research Working Paper Series 3347, The World Bank.
  10. Sergio L. Schmukler, 2004. "Financial globalization: gain and pain for developing countries," Economic Review, Federal Reserve Bank of Atlanta, issue Q 2, pages 39 - 66.
  11. Lesmond, David A., 2005. "Liquidity of emerging markets," Journal of Financial Economics, Elsevier, vol. 77(2), pages 411-452, August.
  12. Jochen R. Andritzky, 2007. "Capital Market Development in a Small Country," IMF Working Papers 07/229, International Monetary Fund.
  13. Halling, Michael & Pagano, Marco & Randl, Otto & Zechner, Josef, 2005. "Where is the Market? Evidence from Cross-Listings," CEPR Discussion Papers 4987, C.E.P.R. Discussion Papers.

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