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Enterprise ownership constraints and the role of equity markets in financial development

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  • P. N. Snowden

Abstract

The long standing controversy of the contribution of equity markets to economic development has been reactivated by the emerging markets phenomenon. Positive reassessments have emphasised diversification and liquidity gains for investors funding risky, long lived, projects. The present analysis adopts instead the viewpoint of the issuer; the owner controlled enterprise typical of LDCs. Owners' wealth is a fundamental constraint on expansion when gearing is limited by bankruptcy risk and minority equity issue eases this constraint. It is suggested that equity and debt are thus complementary and that stock markets may improve overall allocative efficiency if equities correctly value firm prospects.

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  • P. N. Snowden, 1997. "Enterprise ownership constraints and the role of equity markets in financial development," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 131-148.
    • Handle: RePEc:taf:jdevst:v:34:y:1997:i:1:p:131-148
    DOI: 10.1080/00220389708422506
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    References listed on IDEAS

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    1. Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers 1, World Bank - International Finance Corporation.
    2. Singh, Ajit, 1994. "Corporate financial patterns in industrialising economies: a comparative international study," MPRA Paper 54936, University Library of Munich, Germany.
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    Cited by:

    1. Bolbol, Ali A. & Omran, Mohammad M., 2005. "Investment and the stock market: evidence from Arab firm-level panel data," Emerging Markets Review, Elsevier, vol. 6(1), pages 85-106, April.
    2. Bijay, K. C. & Snowden, P. N., 1999. "Pricing Shares on a Nascent Market: The Nepal Stock Exchange 1994-96," World Development, Elsevier, vol. 27(6), pages 1083-1096, June.

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