On the Growth Effect of Stock Market Liberalizations
Abstract
We investigate the effect of a stock market liberalization on industry growth in emerging markets. Consistent with the view that liberalization reduces financing constraints, we find that industries that are more externally dependent and face better growth opportunities grew faster following liberalization. However, this growth increase appears to come from an expansion in the size of existing firms rather than through the entry of financially constrained new firms. We show that following liberalization, new firm growth occurs in countries and industries with lower entry barriers. Hence, liberalization has a more uniform growth impact if accompanied by competition-enhancing reforms.
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Financial development disproportionately boosts the growth of firms in industries that depend heavily on external finance.
“Turning to stock markets and financial openness more generally, Gupta and Yuan (2009) and Levchenko, Ranciere, and Thoenig (2009) show that financial development more generally disproportionately boosts the growth of firms in industries that depend heavily on external finance.”
From Finance, Growth, and Inequality (2021) · cites this paper as Gupta and Yuan (2009)
Cites
La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., & Vishny, R. W. (1998) · Journal of Political Economy · doi:10.1086/250042 · Cited by 18,025 · see citing works
Financial development, property rights, and growth
Claessens, S., & Laeven, L. (2003) · The Journal of Finance · doi:10.1046/j.1540-6261.2003.00610.x · Cited by 338 · see citing works
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Finance, Growth, and Inequality
Levine, R. (2021) · IMF Working Papers · doi:10.5089/9781513583365.001 · Cited by 62 · see citing works
- Authors
- Gupta, N., & Yuan, K.
- Affiliations
- Indiana University (US)
- London School of Economics and Political Science (GB)
- Corresponding author
- Gupta, Nandini
- ORCID
- Gupta, Nandini
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2009-02-20
- Volume
- 22
- Issue
- 11
- Pages
- 4715-4752
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W2088620406
- Cited by
- 269
- References
- 2
- Citations by year
- 2026: 14 · 2025: 18 · 2024: 18 · 2023: 44 · 2022: 18 · 2021: 20 · 2020: 16 · 2019: 11 · 2018: 10 · 2017: 12 · 2016: 12 · 2015: 8 · 2014: 10 · 2013: 13 · 2012: 14
- FWCI
- 19.21
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Review of Financial Studies (publishedVersion)
- London School of Economics and Political Science Research Online (London School of Economics and Political Science) (acceptedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Global Financial Crisis and Policies
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Keywords
- stock market liberalization, industry growth, financial constraints, emerging markets, firm entry, barriers to entry, external dependence, growth opportunities
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