The impact of capital account liberalization measures |
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Authors: | Chaiporn Vithessonthi Jittima Tongurai |
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Affiliation: | a Mahasarakham Business School, Mahasarakham University, Khamriang, Kantarawichai, Mahasarakham 44150, Thailand b NIDA Center for Integrated Tourism Management Studies, National Institute of Development Administration, Bangkapi, Bangkok 10240, Thailand |
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Abstract: | In this paper we analyze whether capital account liberalization leads to higher asset prices. Based on a sample of 242 non-financial firms listed on the Stock Exchange of Thailand at the time of the announcement of the relaxation of capital control in Thailand on January 29, 2007, we find positive and significant abnormal returns on Day −2, Day 1, and Day 3 relative to the announcement day. Our findings suggest that capital account liberalization favorably affects stock prices of firms, though the effect varies across industries. From a public policy perspective, our results suggest that liberalizing capital account by relaxing capital control measures could improve firm value in the short-term, which may, in turn, boost the level of economic growth in the long run. In addition, the results show that there is a significant fall in the mean beta in the post-liberalization period, thereby implying the lower cost of capital. |
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Keywords: | F31 G14 G15 G32 |
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