Capital Inflows, Equity Issuance Activity, and Corporate Investment
This paper uses issuance-level data to study how equity capital inflows that enter emerging market economies affect equity issuance and corporate investment. It shows that foreign inflows are strongly correlated with country-level issuance. The rel...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/470511523557571868/Capital-inflows-equity-issuance-activity-and-corporate-investment http://hdl.handle.net/10986/29706 |
| Summary: | This paper uses issuance-level data to
study how equity capital inflows that enter emerging market
economies affect equity issuance and corporate investment.
It shows that foreign inflows are strongly correlated with
country-level issuance. The relation reflects the behavior
of large issuers issuing in domestic equity markets and that
of firms issuing in international markets. Those larger,
more liquid, and highly valued firms are the ones more
likely to raise equity when their country receives capital
inflows. To identify supply-side shocks, capital inflows
into each country are instrumented with exogenous changes in
other countries' attractiveness to foreign investors.
Shifts in the supply of foreign capital are important
drivers of increased equity inflows. Instrumented inflows
lead a subset of firms (large domestic issuers and foreign
issuers) to raise new equity, which they use to fund
investment. Corporate investment increases between one-tenth
and four-tenths the amount of foreign equity capital
entering the country. |
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