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Equity market liberalizations as country IPOs

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  • Rodolfo Martell
  • Rene M. Stulz

Abstract

Equity market liberalizations are like IPOs, but they are IPOs of a country's stock market rather than of individual firms. Both are endogenous events whose benefits are limited by poor investor protection, agency costs, and information asymmetries. As for stock prices following an IPO, there are legitimate concerns about the efficiency in the period following the liberalization of the stock market returns of countries that liberalize their equity markets. Equity markets of liberalizing countries experience extremely strong performance immediately after the liberalization, but then go through a period of poor performance. This pattern of stock returns is more dramatic for countries with poorer financial development before the liberalization.

Suggested Citation

  • Rodolfo Martell & Rene M. Stulz, 2003. "Equity market liberalizations as country IPOs," NBER Working Papers 9481, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9481
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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