Cross-Border Listings, Capital Controls, and U.S. Equity Flows to Emerging Markets

 
Author/Editor: Edison, Hali J. ; Warnock, Francis E.
 
Publication Date: December 01, 2003
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: We analyze capital flows to emerging markets in a framework that incorporates two quantitative measures of financial integration, the intensity of capital controls and the extent of cross border listings, while controlling for traditional global (push) and country specific (pull) factors. Two important results emerge. First, the cross listing of an emerging market firm on a U.S. exchange is an important but short lived capital flows event, suggesting that the cross listed stock is in effect a new security that U.S. investors quickly bring into their portfolios. Second, the effect of financial liberalization on capital flows is more nuanced than is suggested by event studies: A reduction in capital controls results in increased inflows only when the controls are binding. Among the standard push and pull factors, global factors are important-slack U.S. economic activity is associated with increased flows to emerging markets-and U.S. investors appear to chase expected, but not past, returns.
 
Series: Working Paper No. 03/236
Subject(s): Capital controls | Capital flows | Emerging markets | Economic models

Author's Keyword(s): Portfolio equity flows | capital flows | emerging markets | and ADRs
 
English
Publication Date: December 01, 2003
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2362003 Pages: 42
Price:
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