Showing papers on "Market capitalization published in 2003"

Econophysics: Master curve for price-impact function.

Abstract: The price reaction to a single transaction depends on transaction volume, the identity of the stock, and possibly many other factors. Here we show that, by taking into account the differences in liquidity for stocks of different size classes of market capitalization, we can rescale both the average price shift and the transaction volume to obtain a uniform price-impact curve for all size classes of firm for four different years (1995–98). This single-curve collapse of the price-impact function suggests that fluctuations from the supply-and-demand equilibrium for many financial assets, differing in economic sectors of activity and market capitalization, are governed by the same statistical rule.

Scale and the Scale Effect in Market‐based Accounting Research

Abstract: The nature of the data we usually encounter in market-based accounting research is such that the results of the regressions of market capitalization on financial statement variables (referred to ‘price-levels’ regressions) are driven by a relatively small subset of the very largest firms in the sample. We refer to this overwhelming influence of the largest firms as the ‘scale effect’. This effect is more than heteroscedasticity. It arises due to the non-linearity in the relation between market capitalization and the financial statement variables. We present the case that scale is market capitalization rather than a correlated omitted variable. Since scale is market capitalization, we advocate its use as a deflator in a regression estimated using weighted least squares. This regression overcomes the scale effect and the resultant regression residuals are more economically meaningful. Christie's (1987) depiction of scale is the same as ours but he advocates the use of the returns regression specification in order to avoid scale effects. We agree that returns regressions should be used unless the research question calls for a price-levels regression.

What Caused Enron?: A Capsule Social and Economic History of the 1990's

Abstract: Between January 1997 and June 2002, approximately 10% of all listed companies in the United States announced at least one financial statement restatement. The stock prices of restating companies declined 10% on average on the announcement of these restatements, with restating firms losing over $100 billion in market capitalization over a short three day trading window surrounding these restatements. Such generalized financial irregularity requires a more generic causal explanation than can be found in the facts of Enron, WorldCom or other specific case histories. Several different explanations are plausible, each focusing on a different actor (but none giving primary attention to the board of directors): 1. The Gatekeeper Story looks to the professional "reputational intermediaries" on whom investors rely for verification and certification - i.e., auditors, analysts, debt rating agencies and attorneys - and views the surge in financial restatements as the product of both (a) reduced legal exposure for gatekeepers (as the result of legislation and judicial decisions in the 1990's sheltering them from liability) and (b) the increased potential for consulting income or other benefits from their clients (resulting in gatekeeper acquiescence in accounting or financial irregularities). This is essentially the story to which the Sarbanes-Oxley Act responds. 2. The Misaligned Incentives Story instead focuses on managers and a dramatic change in executive compensation during the 1990's, as firms shifted from cash to equity-based compensation. Stock options (and legal changes that enabled management to exercise the option and sell the security without any delay) arguably gave management a strong incentive to inflate reported earnings and create short-term price spikes that were unsustainable, but which they alone could exploit. Sarbanes-Oxley does not address this potential cause of irregularities. 3. The Herding Story focuses on the incentives of investment fund managers and argues that they are uniquely focused on their quarterly performance vis-a-viz their rivals. As a result, they have an incentive to "ride the bubble," even when they sense danger, because they fear more the mistake of being prematurely prophetic. Again, Sarbanes-Oxley does not address this cause of bubbles and price spikes. This comment compares and contrasts these explanations, finding them highly complementary.

Short-term reaction of stock markets in stressful circumstances

Abstract: In this paper we document the short-term stock price behaviour following a period of stock market stress. We focus on price behaviour using daily market indexes from 39 stock exchanges over the period 1989–1998. Our results are not consistent with the overreaction hypothesis. We find positive (negative) abnormal price performance in the short-term window (up to 10 days) following positive (negative) price shocks. Our analysis also highlights differences between developed and emerging markets. We show that the post-shock abnormal performances are significantly larger for emerging markets but that this momentum behaviour is markedly less in the late 1990s. We find the size of the after-shock tremors to be related to market liquidity, with larger post-shock price changes in less-liquid markets.

Are Momentum Profits Robust to Trading Costs

Abstract: This paper tests whether momentum-based strategies remain profitable after considering market frictions, in particular price concessions induced by trading. Alternative measures of price impact are estimated and applied to alternative momentum-based trading rules. The performance of traditional momentum strategies, in addition to strategies designed to reduce the cost of trades, is evaluated. We find that, after taking into account the price impact induced by trades, as much as 5 billion dollars (relative to December 1999 market capitalization) may be invested in some momentum-based strategies before the apparent profit opportunities vanish. Other, extensively studied, momentum strategies are not implementable on a large scale. The persistence of momentum returns exhibited in the data remains an important challenge to the asset-pricing literature.

What Caused Enron?: A Capsule Social and Economic History of the 1990's

Abstract: Between January 1997 and June 2002, approximately 10% of all listed companies in the United States announced at least one financial statement restatement The stock prices of restating companies declined 10% on average on the announcement of these restatements, with restating firms losing over $100 billion in market capitalization over a short three day trading window surrounding these restatements Such generalized financial irregularity requires a more generic causal explanation than can be found in the facts of Enron, WorldCom or other specific case histories

The Role of Adrs in the Development of Emerging Equity Markets

Abstract: This study measures the dynamics of the growth and expansion of international cross-listings through American Depositary Receipts (ADRs) in emerging equity markets around the world and evaluates its impact on their development and integration with world markets. Overall, I find that the increasing number of new ADR programs, their market capitalization and trading volume in those countries are positively associated with the pace of international capital flows and greater market integration, but, at the same time, adversely impact the size, scope and liquidity of the home markets. I discuss the implications of these findings for existing research on capital market liberalization and on ADR markets and for the public policy debate on ADRs and their impact on the global competitiveness of national stock markets.

Portfolio Flows Into India : Do Domestic Fundamentals Matter?

Abstract: This paper analyzes the factors affecting portfolio equity flows into India using monthly data. Flows to India are small compared to other emerging markets, but seem to be relatively less volatile. They also seem to be quite resilient. The paper shows that portfolio flows are determined by both external and domestic factors. Among external factors, LIBOR and emerging market stock returns are important, while the primary domestic determinants are the lagged stock return and changes in credit ratings. In quantitative terms, both external and domestic factors are found to be about equally important.

Modeling growth stocks via birth-death processes

Abstract: The inability to predict the future growth rates and earnings of growth stocks (such as biotechnology and internet stocks) leads to the high volatility of share prices and difficulty in applying the traditional valuation methods. This paper attempts to demonstrate that the high volatility of share prices can nevertheless be used in building a model that leads to a particular cross-sectional size distribution. The model focuses on both transient and steady-state behavior of the market capitalization of the stock, which in turn is modeled as a birth–death process. Numerical illustrations of the cross-sectional size distribution are also presented.

Leading for value

Abstract: From 1983 to 2001, British bank Lloyds TSB increased its market capitalization 40-fold, in part by shedding assets and narrowing its focus. But something else was at work: a CEO-led transformation of the company's culture.

Is Long Memory a Property of Thin Stock Markets? International Evidence Using Arab Countries

Abstract: The paper analyzes the long memory property of stock index returns in 14 markets with diverse levels of development. While the sample includes the developed stock markets of Japan, UK and USA, it also includes, in addition to the emerging markets of Brazil, India and Mexico, those of eight Arab countries as benchmarks of thin markets with the aim of investigating the link between fractional integration dynamics in stock returns and the level of stock market development. Using parametric and semi-parametric estimation procedures, the results show that the property of long-range dependence in stock index returns tend to be associated with relatively thin stock markets. Evidence from the Arab countries seems to suggest that long-memory might also be linked to the peculiar characteristics and the environment within which each stock market operates.

The Cost of Trend Chasing and The Illusion of Momentum Profits

Abstract: There is a large and growing literature documenting the relation between ex ante observable variables and stock returns. Importantly, much of the evidence on the relation between returns and observable variables like market capitalization, the ratio of price/book, and prior price change has been portrayed in the context of returns to simulated portfolio strategies. Often missing in these analyses is the distinction between realizable returns (i.e., the returns portfolio managers can realistically achieve in practice) and returns to simulated strategies. There is ample evidence that size and value strategies can be successfully implemented in practice; that is not the case for momentum strategies. This paper documents the costs of implementing actual momentum strategies. I examine the trade behavior, and the costs of those trades, for three distinct investor styles (momentum, fundamental/value, and diversified/index) for 33 institutional investment managers executing trades in the U.S. and 36 other equity markets worldwide in both developed and emerging economies. The results show: (1) that momentum traders do indeed condition their trades on prior price movements; and (2) that costs for trades that are made conditional on prior market returns are significantly greater than for unconditional costs, especially for momentum traders. The evidence that we report on the actual costs of momentum-based trades indicates that the returns reported in previous studies of simulated momentum strategies are not sufficient to cover the costs of implementing those strategies.

The Market Valuation of Environmental Capital Expenditures by Pulp and Paper Companies

Abstract: The objective of this study is to examine the market valuation of environmental capital expenditure investment related to pollution abatement in the pulp and paper industry. The total environmental capital expenditure of $8.7 billion by our sample firms during 1989-2000 supports the focus on this industry. In order to be capitalized, an asset should be associated with future economic benefits. The existing environmental literature suggests that investors condition their evaluation of the future economic benefits arising from environmental capital expenditure on an assessment of the firms' environmental performance. This literature predicts the emergence of two environmental stereotypes: low polluting firms that overcomply with existing environmental regulations, and high polluting firms that just meet minimal environmental requirements. Our valuation evidence indicates that there are incremental economic benefits associated with environmental capital expenditure investment by low polluting firms but not high polluting firms. We also find that investors use environmental performance information to assess unbooked environmental liabilities, which we interpret to represent the future abatement spending obligations of high polluting firms in the pulp and paper industry. We estimate average unbooked liabilities of $560 million for high polluting firms, or 16.6 percent of market capitalization.

Income Trusts: Understanding the Issues

Abstract: An income trust is an investment vehicle that distributes cash generated by a set of operating assets in a tax-efficient manner. The market capitalization of income trusts has grown rapidly over the past two years, reaching $45 billion at year-end 2002.

Method for providing the information on stock price

Abstract: This invention relates to a method for producing the Reasonable Stock Price of Stock Exchange listed-companies and providing clients with it in real time or at a regular time interval through an Internet site or mobile communication facilities wherein the Reasonable Stock Price reflects information about the changing of market environment in real time or at a regular time interval. This invention comprises creating an Individual Company's Fundamentals Database; creating a Stock Price Indicator and Economic Indicator Database; producing a Reasonable Stock Price Valuation Index Database which reflects the created databases of Individual Company's Fundamentals, Stock Price Indicator and Economic Indicator; producing the Individual Company's Reasonable Stock Price from the Reasonable Stock Price Valuation Index Database; and providing a client information on the Reasonable Stock Price in real time or at a regular time interval through an Internet site or mobile communication network on the demand of clients.

Country and Industry Dynamics in Stock Returns

Abstract: A perennial question in international finance is to what extent stock returns are influenced by country-location, as opposed to industry-affiliation, factors. This paper develops a novel methodology to measure these effects, in which portfolios mimicking "pure" country and industry factors are first constructed and their joint dynamics then modeled as regime-switching processes. Estimation using global firm-level data allows us to identify well-defined volatility states over the past thirty years and shows that the contribution of the industry factor becomes systematically more prominent during high global volatility states, while the country factor contribution declines. Using the model's estimates, we find that portfolio diversification possibilities vary considerably across economic states.

The Emergence of Shareholder Value in the German Corporation

Abstract: We analyze the effects of changes in the purpose of large German corporations from stakeholder-oriented organizations to shareholder-oriented organizations during the decade of the 1990s We document this transformation by first examining the annual reports of large firms at strategic points in time relative to significant changes in German corporate law We find that changes in the law over this period both reflected and facilitated a fundamental shift in the operations of German corporations as evidenced by their adoption of stock- and option-based incentive compensation plans, adoption of US GAAP-based (or related) accounting systems, ADR listings, and restructuring activity We also document the emergence and adoption of the rhetoric of shareholder value among German managers, the public, and the media Detailed empirical analysis shows that German firms that embraced shareholder value as their corporate purpose and operating strategy realized a slight gain in equity values over the decade of the 1990s, as well as a significant increase in their Betas relative to the S&P 500, when compared to less shareholder-oriented firms We interpret the Beta shifts as evidence that focusing on shareholder value leads firms to adopt entrepreneurial risk-taking strategies that reflect shareholder, rather than stakeholder, concerns We conjecture that the increase in Betas might also be due to the adoption by some German firms of a similar operating philosophy to that of the traditionally shareholder-oriented US corporation Finally, we show that German firms that embraced shareholder value-orientation during the 1990s realized significantly greater growth in their Market-to-Book ratios and market capitalizations relative to their less shareholder-oriented counterparts

Organized Equity Markets in Germany

Abstract: The German financial system is the archetype of a bank-dominated system. This implies that organized equity markets are, in some sense, underdeveloped. The purpose of this paper is, first, to describe the German equity markets and, second, to analyze whether it is underdeveloped in any meaningful sense. In the descriptive part we provide a detailed account of the microstructure of the German equity markets, putting special emphasis on recent developments. When comparing the German market with its peers, we find that it is indeed underdeveloped with respect to market capitalization. In terms of liquidity, on the other hand, the German equity market is not generally underdeveloped. It does, however, lack a liquid market for block trading.

China's Informal Stock Market: How it Developed, how it Works and how it Might Grow

Abstract: China has a highly active informal market in shares. The shares of over 1,000 companies are traded and some 3m investors take part in a market in corporate equities organised in various locales outside the two stock exchanges in Shanghai and Shenzhen. China's informal share market has appeared in a number of different guises since the establishment of the stock market in the late 1980s, partly as a result of the government's restrictions as to which type and what number of firms can publicly issue shares. While the central government has at various times attempted to close down these informal markets, they continue to flourish as shareholding firms seek to raise capital and owners of firms seek to transfer their ownership rights outside the bounds of the formal financial sector. This suggests that the government should move to formalise these markets, a move that would recognise the incipient demand for shares and allow the government to introduce a basic regulatory framework for a market which evidently can not be easily suppressed. This paper is divided into three parts. The first provides a brief historical overview of the development of informal share markets in reform China, from the kerb markets of the mid-1980s to the Internet-based brokers of 2003. The second section looks in detail at the organisation of the market today; how shares are issued, traded and settled. Third, and last, the paper identifies the problems inherent in the market at present and outlines the possibilities for its future.

Privatization as a means to societal transformation : an empirical analysis of privatization in Central and Eastern Europe and the Former Soviet Union

Abstract: There have been numerous empirical studies of privatization programs, which have found efficiency gains to firms, industries, and financial markets in a multitude of developed and developing economies. Central and Eastern Europe and the Former Soviet Union are conspicuously and consistently absent from these studies. Some reasons for this include the lack of reliable and consistent firm data both before and after privatization, the absence of vital business mechanisms and institutions to distribute reliable business information, and misconceptions about what privatization actually is. Given these problems, Stiglitz (1998) offers an interesting solution for measuring the "success" privatization in CEE and FSU. Stiglitz (1998) provides six factors to be considered when assessing the impact of any type of economic reform: economic growth, health, education, infrastructure, knowledge, and capacity-building. Through correlation analysis, financial, economic and social variables representing these six dimensions are reduced to fourteen key variables that describe privatization/economic reform success. A series of mean analyses are performed, taking into consideration privatization program characteristics and control variables to account for other economic reforms that have occurred simultaneously with privatization. General findings suggest that overall there is positive economic, financial, and social growth after privatization. However, it is difficult to discern the effects of privatization, from the effects of other economic reforms. In addition, countries that have manager/employee privatization do not have sale privatization as part of their programs experience negative growth in market capitalization, value of stocks traded, and official development assistanc

Effect of Information and Communications Technology on Stock Market Development: Evidence from Emerging Markets and High-Income Economies

Abstract: This paper investigates the links between information and communications technology (ICT) and stock market development in a sample comprising of high-income and emerging market economies. The empirical results of the least squares dummy variable model confirms that personal computers and internet hosts as the two ICT variables having strong positive effects on stock market development. The results also revealed strong positive effects of market capitalization and credit to the private sector as non-ICT contributors to stock market development. Controlling for income and technological differences, our results lead us to conclude that emerging market economies have already seized an opportunity to leap frog the high-income countries that is, by going straight from underdeveloped networks to fully digitized networks, bypassing the traditional analog technology. As such this leap frogging is positively enhancing their stock markets. Some policy implications are drawn. 1. Introduction Numerous studies pertaining to the literature on stock market development have emphasized the impact of several financial and economic variable (see for example, Levine, 1991, p. 1445; Bhide, 1993, p. 2; Atje and Javanovic, 1993, p. 632-38; Harris, 1997, p. 139-140; Levine and Zervos, 1998, p.3-4; Beck, Levine and Norman, 2000, p. 195-93; Arestis, Demetriades and Luintel, 2001, p. 20). A factor that in recent times seems to have a possible strong impact on growth and development of stock markets is the new information and communications technology (ICT): mobile phones, personal computers and internet hosts. At the theoretical level, some studies have presented arguments in favor of the possible beneficial effects of information technology on an economy's financial sector. For example, Levine (1997, p. 942-43) notes that changes in telecommunications and computers, among other factors, influence the quality of financial services and the structure of the financial systems. In additions, the World Bank (1998, p.12) notes that advancements in communication have for long been a major driving force bringing about positive economic changes to many countries. Further, the Human Development Report 2001 (UNDP, 2001, chapters 2 and 3) gives a comprehensive account of how new technologies, including information and communication technology, work for the betterment of an economy. The rapid pace in dissemination of vast amounts of vital information on the performance of stock and financial markets is possibly contributing to the speed of the development of stock markets. However, at the empirical level, the literature is still rare particularly in terms that support the theoretical contention as indicated above. One reason for this rarity is the lack of long-term time data series particularly on the modern instruments of ICT (mobile phones, personal computers and Internet hosts) necessary to validate the theoretical contention. While some data have recently been made available on some of the modern instruments of ICT, an empirical investigation into ICT and stock market relationships would perhaps be a modest start to ascertain the impact of new information technology on the growth of stock markets. Such useful attempts would also complement the current discussions on information technology and its role in spreading financial knowledge. Thus, the primary aim of this paper is to examine the contribution of ICT on stock market development in emerging markets and high-income economies. To that end, in section two, we discuss some theoretical arguments on information technology and stock market knowledge linkages. A discussion of the estimation methodology, data and empirical findings are presented in section three. A conclusion and policy implications are provided in section four. 2. An Overview of ICT and Stock Market Developments One of the support systems of a country's financial market is the stock market. …

The Corporate Governance Behavior and Market Value of Russian Firms(Russian version)

Abstract: I examine the relationship between corporate governance behavior and market value for a sample of 21 Russian firms I use (1) fall 1999 corporate governance rankings for these firms, developed by a Russian investment bank, and (2) the "value ratio" of actual market capitalization to potential Western market capitalization for these firms, determined independently by a second Russian investment bank The correlation between ln(value ratio) and governance ranking is striking and statistically strong: Pearson r = 090 (t = 897) A worst (51 ranking) to best (7 ranking) governance improvement predicts a 700-fold increase in firm value These results are tentative because of the small sample But they suggest that corporate governance behavior has a powerful effect on market value in a country where legal and cultural constraints on corporate behavior are weak The Russian version of this paper is available below The English version is available at: http://ssrncom/abstract_id=263014

Boom and Bust in Telecommunications

Abstract: The telecommunications sector has experienced a spectacular decline from mid-2000 until the present, after experiencing a spectacular rise from early 1997. Equity valuations and capital spending soared and then plummeted, and a flood of initial public offerings turned into a flood of bankruptcy filings. The boom and bust in telecommunications coincided with the boom and bust in the U.S. equity market as a whole and with the "dot-com bubble" of Internet stocks. The dot-corns received most of the publicity initially, but the telecommunications industry accounts for a much larger share of market capitalization gained and lost than do the dot-corns.1 This article documents the telecom boom and bust, and contends that it was caused by a combination of major changes in the regulatory landscape and rapid technological progress. Both factors made it difficult for telecommunications firms and outside investors to accurately forecast supply and demand conditions in the industry.2 The single most important telecommunications regulatory change in recent years was the Telecommunications Act of 1996. This Act was meant to bring competition to the local exchange carrier level, that is local telephone service. By 1996, long-distance telephone service had a significant amount of competition, whereas local service was largely monopolized by the regional Bell operating companies, such as Bell Atlantic and Southwestern Bell. On the technological side, passage of the 1996 Act coincided with advances in fiberoptic technology that dramatically increased the capacity for data transmission and with more efficient use of the spectrum available for wireless communication. This was also a time of rapidly increasing Internet use. Growth of the Internet alone meant greater demand for telecommunications services. The combination of improving technology for data transmission and the possibility of a deregulated market for telecommunications services held out the potential that providers would be able to compete for all of a household's or firm's telecorn needs. The confluence of these factors led to the tremendous investment surge and high stock valuations that were the hallmark of the telecom boom.3 Within four years of its passage, however, the Act's initial promise had faded. A series of legal battles had ushered in tremendous uncertainty about the industry's future. By early 2001, it became apparent that massive overinvestment had taken place in the sector, particularly in the area of long-distance fiber-optic cable. Stock prices plunged and investment collapsed. These problems were exacerbated by the U.S. economy's swing into recession early in 2001, and the telecommunications sector remains in a slump to this day. We do not subscribe to the view held by many, that the boom and bust in the telecommunications industry represented a bubble that burst.4 According to this view, telecom equity prices were high because people believed they would be high in the future, though there was no expectation of high future dividends. In turn, high equity prices drove the high levels of investment in the industry. Then, when the belief collapsed, equity prices and investment collapsed (the bubble burst). With the benefit of hindsight, it is clear that telecom equity prices and levels of capital spending were "too high" in the late 1990s. However, high equity prices and high investment seem to have been based on beliefs about future fundamentals, not simply on the expectation that prices would rise in the future. We are also skeptical about the view that WorldCom can be blamed for the industry's fluctuations. Already much has been written about the fluctuations in the telecommunications industry around the turn of the 21st century. We look forward to thorough analyses of this episode in the years to come. Our purpose in this article is to document some basic facts about what happened in the telecommunications industry, and to propose an explanation for those facts. …

Takeover defense when financial markets are (only) relatively efficient

Abstract: This paper evaluates the impact of developments in the understanding of asset value pricing for alternative legal standards for takeover defenses: the management discretion and the shareholder rights positions. Both sides place considerable, albeit implicit, reliance on alternative views of the efficiency of financial markets. Developments in finance theory show that when financial markets are only "relatively efficient," stock prices can incorrectly value the corporation at any point in time, at the same time as investors cannot outperform the market on an ongoing basis. I focus on financial market anomalies arising from the failure of the capital asset pricing model to provide a reliable estimate of the market capitalization rate. In a world of perfectly efficient capital markets, a shareholder choice standard is the dominant policy solution. In such a state, any noncoercive hostile tender offer at a premium to the market price moves assets to more valued uses while offering shareholders enhanced market value. Best of all, it sends a clear signal to all managers to be more faithful to shareholder interests or risk losing their jobs. But in a world where capital markets are only relatively efficient, the calculus shifts. Successful hostile tender offers could move assets to less valued uses. Shareholders could be paid less than the intrinsic value of the corporation. Worst of all, managers might choose to manage to the financial market anomalies; that is, to adopt otherwise suboptimal business strategies intended to minimize the risks of under-pricing or maximize the probability of over-pricing. I conclude that the legal standard prevailing in Delaware regarding takeover defenses can be understood as focusing on giving managers the discretion to maximize the value of the corporation. In light of modern finance theory, and the evidence that capital markets are only relatively efficient, this is a plausible way to strike the balance.

Models of financial disclosure on the internet: a survey of italian companies

Abstract: The growth in the diffusion of financial information on corporate web sites has given rise to a number of studies and research into the topic (e.g. IASC 1999, FASB 2001). Some authors have carried out surveys to establish the extent of Internet reporting by companies in different countries (Flynn and Gowthorpe, 1997; Lymer, 1997; Marston and Craven, 1999 etc.). Past studies have tended to focus on mandatory disclosure via the Internet. This study aims to go beyond this and shift the focus to voluntary financial disclosure as well as the possibilities offered by the Internet to disclose this kind of information. The first step was the definition of “the state of the art” in corporate financial disclosure on the web. An empirical study was carried out from mid-July to mid-September 2001 among the 277 Italian companies listed on the Milan Stock Exchange. It examined whether voluntary financial information was available on web sites and, if so, its extent. This study looked for a statistical relationship between some segments of the overall Italian Stock Exchange (MIB 30, STAR, “Nuovo Mercato”) and the extent and the way of communicating voluntary information on the Internet in order to find the “cutting edge” sector in financial corporate disclosure. A linear correlation between market capitalization, high debt equity ratio, outstanding share and the extent of financial disclosure on the Internet was investigated by means of the “rho” coefficient. Models of financial disclosure on the Internet: a survey of italian companies

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

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.