Trading externalities and new equity issues in emerging markets |
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| Affiliation: | 1. Department of Economics, Wichita State University, 1845 Fairmount, Wichita, KS 67260-0078, USA;2. Department of Military Science, University of California at Berkeley, 173 Hearst Gym, No. 4440, Berkeley, CA 94720-4440, USA;1. University of Akron, 7380 Sherman Road, Chesterland, OH 44026, USA;2. School of Business, Trinity College, Dublin 2, Ireland;3. Institute for International Integration Studies (IIIS), The Sutherland Centre, Level 6, Arts Building, Trinity College, Dublin 2, Ireland;4. Glasgow Business School, Glasgow Caledonian University, Cowcaddens Rd, Glasgow, Lanarkshire G4 0BA, United Kingdom;5. Faculty of Economics, University of Ljubljana, Kardeljevaploscad 17, Ljubljana 1000, Slovenia;6. York St. John''s Business School, York St John University, Lord Mayor''s Walk, York YO31 7EX, United Kingdom;1. School of Management Science and Engineering, Dalian University of Technology, Linggong Road 2, Dalian, Liaoning 116024, China;2. CreditEase Co., 10th Floor, Tower C, SOHO New Town, 88 Jianguo Road, Chaoyang District, Beijing 100022, China;3. Hangzhou Juhuida Technology Co., Ltd., 14C, Dongfang Rd.1361, Pudong, Shanghai, China;1. Development Finance Centre, Graduate School of Business, University of Cape Town, Cape Town, South Africa;2. University of Westminster, Department of Economics and Quantitative Methods, UK;3. School of Economics, Finance and Accounting, Faculty of Business and Law, Coventry University Priory Street, Coventry, CV1 5FB, UK;4. Faculty of Applied Economics, University of Antwerp, Antwerp, Belgium;1. Bank of Sharjah Chair, American University of Sharjah, United Arab Emirates;2. University of Alberta, Edmonton, AB T6C 4G9, Canada;3. School of Accounting and Finance, The Hong Kong Polytechnic University, Hong Kong;1. CREM, Université d’Angers, 2 Rue de Rennes, 49100 Angers, France;2. Univ Rennes, CNRS, CREM – UMR 6211, F-35000, Rennes, France;1. School of Business, Middle Georgia State University, Macon, GA, 31206, United States;2. College of Business, University of Findlay, Findlay, OH, 45840, United States |
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| Abstract: | The volatility in emerging market finance over the last decade has highlighted the importance of developing equity exchanges to enhance risk sharing between international investors. Debt markets do not allow for as much risk sharing. Theoretically, stock market development involves trading externalities, as the decision by one firm to list provides a positive spillover for other firms considering an initial offering. This theory thus has a clear policy implication in terms of deliberate government action to promote stock market development. This paper tests empirically for the existence of trading externalities in developing countries, and finds evidence of such externalities for Latin American, but not Asian, stock markets. |
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