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

Hali Edison () and Francis Warnock

No 2003/236, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; capital control; equity flow; market equities; flows data; portfolio equity flows; capital flows; emerging markets; ADRs; flows datum; emerging market equity; capital controls lead; emerging market borrowing costs; portfolio equity; composite index; model capital control; tic flows datum; U.S. Treasury International; emerging markets sample; Capital controls; Stocks; Emerging and frontier financial markets; Market capitalization; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 43
Date: 2003-12-01
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Cross-border listings, capital controls, and equity flows to emerging markets (2008)
Working Paper: Cross-border Listings, Capital Controls, and Equity Flows To Emerging Markets (2006)
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