Keywords

financial liberalization, investability, foreign investors, Tobin’s q

Abstract

We study how investability, or openness to foreign equity investors, affects firm value in a sample of over 1,400 firms from 26 emerging markets. We find that, on average, investability is associated with a 9% valuation premium (as measured by Tobin’s q). However, in firm-fixed effects regressions this valuation premium disappears, suggesting that investability does not have a causal effect on firm value. Analysis of the components of Tobin’s q shows that firms that become investable experience significant increases in both market values and physical investment. These effects are strongest for firms that face country-level or firm-level financial constraints prior to becoming investable.

Original Publication Citation

Investability and firm value (with T. O’Connor), 2012, European Financial Management 18, 731–761.

Document Type

Peer-Reviewed Article

Publication Date

2008

Publisher

European Financial Management

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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