Working Paper: NBER ID: w9614
Authors: Ross Levine; Sergio L. Schmukler
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, we 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: No keywords provided
JEL Codes: G15; F36; F20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| internationalization (F30) | domestic firm liquidity (G33) |
| migration (F22) | domestic firm liquidity (G33) |
| liquidity spillover (F65) | domestic firm liquidity (G33) |
| domestic trade diversion (F14) | domestic firm liquidity (G33) |
| increased trading of international firms (F23) | decreased trading of non-internationalized domestic firms (F23) |