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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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Handle: RePEc:nbr:nberwo:9614

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Cited by:
  1. Lesmond, David A., 2005. "Liquidity of emerging markets," Journal of Financial Economics, Elsevier, vol. 77(2), pages 411-452, August.
  2. Do, Quy-Toan & Levchenko, Andrei A., 2004. "Trade and financial development," Policy Research Working Paper Series 3347, The World Bank.
  3. 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.
  4. Kristin J. Forbes, 2005. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Working Papers 11372, National Bureau of Economic Research, Inc.
  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, Thorsten & Demirguc-Kunt, Asli & Laeven, Luc & Levine, Ross, 2005. "Finance, firm size, and growth," Policy Research Working Paper Series 3485, The World Bank.
  7. Chinn, Menzie David & Ito, Hiro, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," Santa Cruz Center for International Economics, Working Paper Series qt5pv1j341, Center for International Economics, UC Santa Cruz.
  8. 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.
  9. Olatundun Janet Adelegan, 2009. "The impact of the regional cross-listing of stocks on firm value in sub-Saharan Africa," IMF Working Papers 09/99, International Monetary Fund.

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