Migration, spillovers, and trade diversion: the impact of internationalization on stock market liquidity

Ross Levine () and Sergio Schmukler

No 3046, Policy Research Working Paper Series from The World Bank

Abstract: 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.

Keywords: Small and Medium Size Enterprises; Payment Systems&Infrastructure; Microfinance; Economic Theory&Research; Small Scale Enterprise; Economic Theory&Research; Financial Intermediation; Microfinance; Private Participation in Infrastructure; Small Scale Enterprise (search for similar items in EconPapers)
Date: 2003-05-31
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (28)

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Related works:
Working Paper: Migration, Spillovers,and Trade Diversion: The Impact of Internationalization on Stock Market Liquidity (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3046

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