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Financial openness & institutions in developing countries

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  • Kant, Chander

Abstract

The paper examines for foreign portfolio investment recent result that foreign direct investment has positive effect on institutions in developing countries. Promise of firms to improve governance (in order to raise funds from outsiders) is more credible if they cross-list on the U.S. stock exchange. Stringent disclosures required by the U.S. are available to domestic regulators who become under pressure to follow global standards. Using 48 developing countries, I show greater openness of stock and bonds markets leads to better quality relevant institutions. I use both a natural experiment, viz. 2008 financial crisis outflows, and 2SLS/IV estimation to examine the endogeniety issues.

Suggested Citation

  • Kant, Chander, 2018. "Financial openness & institutions in developing countries," Research in International Business and Finance, Elsevier, vol. 46(C), pages 240-250.
    • Handle: RePEc:eee:riibaf:v:46:y:2018:i:c:p:240-250
    DOI: 10.1016/j.ribaf.2018.03.001
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    More about this item

    Keywords

    Foreign portfolio investment; Cross-listing; Disclosures; Natural experiment;
    All these keywords.

    JEL classification:

    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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