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Capital Inflows, Equity Issuance Activity, and Corporate Investment

Charles Calomiris, Mauricio Larrain () and Sergio Schmukler ()

No 24433, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use issuance-level data to study how equity capital inflows that enter emerging market economies affect equity issuance and corporate investment. We show that foreign inflows are strongly correlated with country-level issuance. The relation reflects the behavior of large issuers issuing in domestic equity markets and that of firms issuing in international markets. Those larger, more liquid, and highly valued firms are the ones more likely to raise equity when their country receives capital inflows. To identify supply-side shocks, we instrument capital inflows into each country with exogenous changes in other countries’ attractiveness to foreign investors. Shifts in the supply of foreign capital are important drivers of increased equity inflows. Instrumented inflows lead a subset of firms (large domestic issuers and foreign issuers) to raise new equity, which they use mainly to fund investment. Corporate investment increases between one-tenth and four-tenths the amount of foreign equity capital entering the country.

JEL-codes: F21 F3 F36 F41 F62 F65 G11 G15 G3 O16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-ifn and nep-opm
Date: 2018-03
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Working Paper: Capital Inflows, Equity Issuance Activity, and Corporate Investment (2019) Downloads
Working Paper: Capital inflows, equity issuance activity, and corporate investment (2018) Downloads
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