The Composition Matters: Capital Inflows and Liquidity Crunch During a Global Economic Crisis

Hui Tong and Shang-Jin Wei

The Review of Financial Studies, 2011, vol. 24, issue 6, 2023-2052

Abstract: This article studies whether the volume and composition of capital flows affect the degree of credit crunch during the 2007--2011 crisis. Using data on 3,823 firms in 24 emerging countries, we find that, on average, the decline in stock prices was more severe for firms that are intrinsically more dependent on external finance for working capital. Interestingly, while the volume of capital flows per se has no significant effect, the composition matters a lot. In particular, greater dependence on non-FDI capital inflows before the crisis worsens the credit crunch during the crisis, while exposure to FDI alleviates the liquidity constraint. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (145)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhq078 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Composition Matters: Capital Inflows and Liquidity Crunch during a Global Economic Crisis (2010)
Working Paper: The Composition Matters: Capital Inflows and Liquidity Crunch During a Global Economic Crisis (2009)
Working Paper: The Composition Matters: Capital Inflows and Liquidity Crunch during a Global Economic Crisis (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:24:y:2011:i:6:p:2023-2052

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().