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

December 1, 2003

Preview Citation

Format: Chicago

Hali J Edison, and Francis E. Warnock Cross-Border Listings, Capital Controls, and U.S. Equity Flows to Emerging Markets, (USA: International Monetary Fund, 2003) accessed November 8, 2024

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.

Subject: Balance of payments, Capital controls, Capital flows, Emerging and frontier financial markets, Financial institutions, Financial markets, Market capitalization, Stocks

Keywords: ADRs, Asia and Pacific, Capital control, Capital controls, Capital controls lead, Capital flows, Composite index, Emerging and frontier financial markets, Emerging market borrowing costs, Emerging market equity, Emerging markets, Emerging markets sample, Equity flow, Flows data, Flows datum, Global, Market capitalization, Market equities, Model capital control, Portfolio equity, Portfolio equity flows, Stocks, Tic flows datum, U.S. Treasury International, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/236
Stock No:

WPIEA2362003
ISBN:

9781451875706
ISSN:

1018-5941

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