Cross-border Listings, Capital Controls, and Equity Flows To Emerging Markets
We investigate the impact of two types of financial liberalizations on short- and long-horizon capital flows to emerging markets in a framework that controls for push and pull factors. The first type of liberalization, a reduction in capital controls, is countrywide but uncertain, because its extent and permanence is not known with certainty. The second type, a cross-border listing, is a firm-level liberalization that has no uncertainty. Consistent with theoretical predictions, we find that the deterministic cross-listing results in an immediate but short-lived increase in capital inflows. In contrast, the uncertain reduction in capital controls results in increased inflows only over a longer horizon, if at all.
This work was initiated while both authors were in the Division of International Finance at the Board of Governors of the Federal Reserve System. We thank for helpful comments and suggestions Campbell Harvey, Jean Imbs, Andrew Karolyi, Assaf Razin, Leigh Riddick, Linda Tesar, Jonathan Wright, and participants at the following conferences and seminars: CEPR/London Business School Conference on International Capital Flows, Federal Reserve Board, Federal Reserve Bank of New York, Kellogg School of Management Conference on Investments in Imperfect Capital Markets, University of Sydney, Washington Area Finance Association, Western Economic Association, and World Bank. We also thank Jean Tobin at the NYSE for data on listings of foreign stocks; Alka Banerjee of Standard and Poor's for helping us with the S&P/IFC data; and Nancy Baer, Jill Faucette, Sara Holland, and Ben Sutton for research assistance. The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the International Monetary Fund or of any other person associated with the IMF. Warnock thanks the Darden School Foundation for generous support. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Edison, H., and F. Warnock, 2008. "Cross-Border Listings, Capital Controls, and Equity Flows to Emerging Markets." Journal of International Money and Finance 27: 1013-1027 citation courtesy of