Working Paper: NBER ID: w8908
Authors: Anusha Chari; Peter Blair Henry
Abstract: In the year that capital-poor countries open their stock markets to foreign investors, the growth rate of their typical firm's capital stock exceeds its pre-liberalization mean by 4.1 percentage points. In each of the next three years the average growth rate of the capital stock for the 369 firms in the sample exceeds its pre-liberalization mean by 6.1 percentage points. However, there is no evidence that differences in the liberalization-induced changes in the cost of capital or investment opportunities drive the cross-sectional variation in the post-liberalization investment increases.
Keywords: No keywords provided
JEL Codes: E2; F3; F4; G31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital account liberalization (F32) | increase in Tobin's q (D25) |
| increase in Tobin's q (D25) | higher investment levels (E22) |
| capital account liberalization (F32) | higher investment levels (E22) |
| capital account liberalization (F32) | capital movement from low to high-return countries (F21) |
| capital account liberalization (F32) | no empirical link to capital allocation (G31) |