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Supply matters for asset prices: evidence from IPOs in emerging markets
We show that the introduction of a new asset affects the prices of previously existing assets in a market. Using data from 254 IPOs in emerging markets, we find that stocks in industries that covary highly with the industry of the IPO experience a larger decline in prices relative to other stocks during the month of the IPO. The effects are stronger when the IPO is issued in a market that is less integrated internationally, and when the IPO is big. The evidence supports the idea that the composition of asset supply affects the cross-section of stock prices.
Trade liberalization and the politics of financial development
A well-developed financial system enhances competition in the industrial sector by allowing easier entry. The impact varies across industries, however. For some, small changes in financial development quickly induce entry and dissipate incumbents? rents, generating strong incentives to oppose improvement of the financial system. In other sectors incumbents may even benefit from increased availability of external funds. The relative strength of promoters and opponents determines the equilibrium level of financial system. This may be perturbed by the effect of trade liberalization on the ...