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Migration, spillovers, and trade diversion : the impact of internationalization on stock market liquidity, Volume 1
Author:Levine, Ross; Schmukler, Sergio L.; Collection Title:Policy, Research working paper series ; no. WPS 3046
Date Stored:2003/06/06Document Date:2003/05/31
Document Type:Policy Research Working PaperSubTopics:Small Scale Enterprise; Payment Systems & Infrastructure; Economic Theory & Research; Microfinance; Small and Medium Size Enterprises; Financial Intermediation; Private Participation in Infrastructure
Language:EnglishMajor Sector:(Historic)Sector not applicable
Report Number:WPS3046Sub Sectors:(Historic)Sector not applicable
Volume No:1  

Summary: What is the impact of firms that cross-list, issue depositary receipts, or raise capital in international stock markets on the liquidity of remaining firms in domestic markets? Using a panel of over 3,200 firms from 55 countries during 1989-2000, Levine and Schmukler find that internationalization reduces the liquidity of domestic firms through two channels. First, the trading of international firms migrates from domestic to international markets and the reduction in domestic liquidity of international firms has negative spillover effects on domestic firm liquidity. Second, there is trade diversion within domestic markets as liquidity shifts out of domestic firms and into international firms.

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