Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks PDF Download

Author: Ms.Yu Shi
Publisher: International Monetary Fund
ISBN: 1498316352
Category : Business & Economics
Languages : en
Pages : 39

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Book Description
Using business registry data from China, we show that internal capital markets in business groups can propagate corporate shareholders’ credit supply shocks to their subsidiaries. An average of 16.7% local bank credit growth where corporate shareholders are located would increase subsidiaries investment by 1% of their tangible fixed asset value, which accounts for 71% (7%) of the median (average) investment rate among these firms. We argue that equity exchanges is one channel through which corporate shareholders transmit bank credit supply shocks to the subsidiaries and provide empirical evidence to support the channel.

Author: Augusto de la Torre
Publisher: World Bank Publications
ISBN: 0821365444
Category : Business & Economics
Languages : en
Pages : 232

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Book Description
Back in the early 1990s, economists and policy makers had high expectations about the prospects for domestic capital market development in emerging economies, particularly in Latin America. Unfortunately, they are now faced with disheartening results. Stock and bond markets remain illiquid and segmented. Debt is concentrated at the short end of the maturity spectrum and denominated in foreign currency, exposing countries to maturity and currency risk. Capital markets in Latin America look particularly underdeveloped when considering the many efforts undertaken to improve the macroeconomic environment and to reform the institutions believed to foster capital market development. The disappointing performance has made conventional policy recommendations questionable, at best. 'Emerging Capital Markets and Globalization' analyzes where we stand and where we are heading on capital market development. First, it takes stock of the state and evolution of Latin American capital markets and related reforms over time and relative to other countries. Second, it analyzes the factors related to the development of capital markets, with particular interest on measuring the impact of reforms. And third, in light of this analysis, it discusses the prospects for capital market development in Latin America and emerging economies and the implications for the reform agenda.

Author: Mr.Luc Laeven
Publisher: International Monetary Fund
ISBN: 1498372201
Category : Business & Economics
Languages : en
Pages : 25

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Book Description
Capital markets can improve risk sharing and the efficiency with which capital is allocated to the real economy, boosting economic growth and welfare. However, despite these potential benefits, not all countries have well developed capital markets. Moreover, government-led initiatives to develop local capital markets have had mixed success. This paper reviews the literature on the benefits and costs of developing local capital markets, and describes the challenges faced in the development of such markets. The paper concludes with a set of policy recommendations emerging from this literature.

Author: Mr.Michael Mussa
Publisher: International Monetary Fund
ISBN: 145195039X
Category : Business & Economics
Languages : en
Pages : 66

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Book Description
This paper discusses the extent to which national capital markets have become linked, and identifies several of the more important consequences of that increased degree of integration. Alternative approaches to the measurement of capital market integration are reviewed, including deviations from the law of one price, differences between actual and optimally diversified portfolios, correlations between domestic investment and domestic saving, and cross-country links in consumption behavior. Two recent episodes of large-scale international capital flows—namely, the turmoil in the European Monetary System in the fall of 1992, and the surge of capital inflows into Latin America during the last three years—are examined for insights into the workings of today’s global capital market. Finally, the paper offers some concluding remarks on the future development of international capital markets, on exchange rate management, on alternative approaches to living with larger and more influential financial markets, and on the financing of investment in the formerly centrally planned economies.

Author: Ishac Diwan
Publisher: World Bank Publications
ISBN:
Category : Capital
Languages : en
Pages : 55

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Author: Stephen R. Foerster
Publisher:
ISBN:
Category :
Languages : en
Pages : 45

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This study investigates the long-run return performance of non-U.S. firms that raise equity capital in U.S. markets. Overall, our sample of 333 global equity offerings with U.S. depositary receipt (ADR) tranches from 35 countries in Asia, Latin America, and Europe under-perform local and global benchmarks by 8% to 39% over the three years following issuance. We show that differences in long-run returns are related to the scope and magnitude of investment barriers that induce segmentation of capital markets around the world. Specifically, companies from emerging markets and those that issue equity by way of Rule 144A private placements significantly underperform publicly-listed issues and those of companies in developed markets. We also show that inter-market competition for order flow in the post-issuance period affects their long-run return performance. Post-issuance cumulative abnormal returns are most significantly and positively related to the ability of the offering to generate a larger share of U.S. trading volume.

Author: Martin Feldstein
Publisher: University of Chicago Press
ISBN: 0226241807
Category : Business & Economics
Languages : en
Pages : 500

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Book Description
Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.

Author: R. Glenn Hubbard
Publisher: University of Chicago Press
ISBN: 0226355942
Category : Business & Economics
Languages : en
Pages : 354

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Book Description
In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.

Author: Jeremy Atack
Publisher: Cambridge University Press
ISBN: 1139477048
Category : Business & Economics
Languages : en
Pages : 497

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Book Description
Collectively, mankind has never had it so good despite periodic economic crises of which the current sub-prime crisis is merely the latest example. Much of this success is attributable to the increasing efficiency of the world's financial institutions as finance has proved to be one of the most important causal factors in economic performance. In a series of insightful essays, financial and economic historians examine how financial innovations from the seventeenth century to the present have continually challenged established institutional arrangements, forcing change and adaptation by governments, financial intermediaries, and financial markets. Where these have been successful, wealth creation and growth have followed. When they failed, growth slowed and sometimes economic decline has followed. These essays illustrate the difficulties of co-ordinating financial innovations in order to sustain their benefits for the wider economy, a theme that will be of interest to policy makers as well as economic historians.

Author: International Monetary Fund. Monetary and Capital Markets Department
Publisher: International Monetary Fund
ISBN: 1498363288
Category : Business & Economics
Languages : en
Pages : 135

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Book Description
The current Global Financial Stability Report (April 2016) finds that global financial stability risks have risen since the last report in October 2015. The new report finds that the outlook has deteriorated in advanced economies because of heightened uncertainty and setbacks to growth and confidence, while declines in oil and commodity prices and slower growth have kept risks elevated in emerging markets. These developments have tightened financial conditions, reduced risk appetite, raised credit risks, and stymied balance sheet repair. A broad-based policy response is needed to secure financial stability. Advanced economies must deal with crisis legacy issues, emerging markets need to bolster their resilience to global headwinds, and the resilience of market liquidity should be enhanced. The report also examines financial spillovers from emerging market economies and finds that they have risen substantially. This implies that when assessing macro-financial conditions, policymakers may need to increasingly take into account economic developments in emerging market economies. Finally, the report assesses changes in the systemic importance of insurers, finding that across advanced economies the contribution of life insurers to systemic risk has increased in recent years. The results suggest that supervisors and regulators should take a more macroprudential approach to the sector.