O'Connor, Thomas G. and Mitton, Todd (2008) Investability and Firm Value. Department of Economics, Finance & Accounting Working paper series N192/05/08. National University of Ireland Maynooth. (Unpublished)

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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 Tobins 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 Tobins 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.

Item Type:	Other
Keywords:	Financial liberalization; Investability; Foreign investors; Tobins q;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	1008
Depositing User:	Ms Sandra Doherty
Date Deposited:	20 May 2008
Publisher:	National University of Ireland Maynooth
Refereed:	No
URI:	http://www.ideas.repec.org/s/nuim/mayecw... http://www.nuim.ie/academic/economics/
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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