The Quality Effect: Does Financial Liberalization Improve the Allocation of Capital?

 
Author/Editor: Abiad, Abdul ; Oomes, Nienke ; Ueda, Kenichi
 
Publication Date: June 01, 2004
 
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Summary: The study documents evidence of a "quality effect" of financial liberalization on allocative efficiency, which is measured by the dispersion in Tobin's Q across firms. Based on a simple model, the authors predict that financial liberalization, by equalizing access to credit, reduces the variation in expected marginal returns. They test this prediction using a new financial liberalization index and firm-level data for five emerging markets: India, Jordan, Korea, Malaysia, and Thailand. They find strong evidence that financial liberalization, rather than financial deepening, improves allocative efficiency.
 
Series: Working Paper No. 04/112
Subject(s): Capital | India | Jordan | Korea, Republic of | Malaysia | Thailand | Investment | Credit | Financial systems | Emerging markets | Forecasting models

Author's Keyword(s): Tobin's Q | financial liberalization | investment | allocative efficiency | inequality
 
English
Publication Date: June 01, 2004
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1122004 Pages: 34
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
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