The determinants of cross-border portfolio equity flows: new evidence from emerging markets

We exploit a proprietary database containing foreign trading data from 20 exchanges for the 2006 - 2018 to expand the existing evidence on cross-border equity flows towards emerging markets. We study whether push and pull factors, as well as explicit and implicit barriers to investment, corporate governance standards and market structure features, influence cross border equity inflows. We firstly find that pull factors are an important determinant of foreign inflows, while push factors have a smaller influence. We also find that emerging markets that remove explicit barriers to investment and adopt stricter corporate governance practices manage to attract larger inflows in the long run, conditional on push and pull factors. Removing information barriers also matters, but relatively less. Market structure features have instead little influence on cross-border flows towards emerging markets.