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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.; Date Stored:2003/06/06
Document Date:2003/05/31Document Type:Policy Research Working Paper
SubTopics:Small Scale Enterprise; Payment Systems & Infrastructure; Economic Theory & Research; Microfinance; Small and Medium Size Enterprises; Financial Intermediation; Private Participation in InfrastructureLanguage:English
Major Sector:(Historic)Sector not applicableReport Number:WPS3046
Sub Sectors:(Historic)Sector not applicableCollection Title:Policy, Research working paper series ; no. WPS 3046
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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