Capital Inflows, Equity Issuance Activity, and Corporate Investment

We study how capital flows that enter emerging countries affects those economies. We use issuance-level data to analyze the relation between equity capital inflows, equity issuance, and corporate investment. Foreign inflows... [ view full abstract ]

We study how capital flows that enter emerging countries affects those economies. We use issuance-level data to analyze the relation between equity capital inflows, equity issuance, and corporate investment. Foreign inflows are strongly correlated with country-level issuance, so they do not entail just a change in shareholders between domestic and foreign investors. Firms issuing in international equity markets and large issuers in domestic markets drive this relation. Large issuers use a substantial portion of their equity proceeds to fund corporate investment, which increases by about one-third of every million U.S. dollar of foreign equity capital entering the country.