NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Migration, Spillovers,and Trade Diversion: The Impact of Internationalization on Stock Market Liquidity

Ross Levine, Sergio L. Schmukler

NBER Working Paper No. 9614
Issued in April 2003
NBER Program(s):   IFM   AP

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.

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Document Object Identifier (DOI): 10.3386/w9614

Published: Levine, Ross and Sergio L. Schmukler. "Internationalization And Stock Market Liquidity," Review of Finance, 2006, v10(Mar), 153-187.

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