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Investability and Firm Value
Mitton, Todd; O'Connor, Thomas G.
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). This significant valuation premium persists in firm-fixed effects regressions, although the magnitude and robustness of the premium is somewhat lower. 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 firmlevel financial constraints prior to becoming investable.
Keyword(s): financial liberalisation; investability; foreign investors; Tobin’s q
Publication Date:
Type: Journal article
Peer-Reviewed: Yes
Institution: Maynooth University
Citation(s): Mitton, Todd and O'Connor, Thomas G. (2012) Investability and Firm Value. European Financial Management, 18 (5). pp. 731-761. ISSN 1354-7798
Publisher(s): Wiley
File Format(s): other
Related Link(s):
First Indexed: 2020-04-02 06:26:45 Last Updated: 2020-04-02 06:26:45