Studies of the relationship between foreign investor participation in public equity markets and aggregate economic activity in emerging economies find strong effects on productivity, investment, economic growth and the price of publicly traded stocks – but it is not clear why. This VoxEU column shows that equity capital inflows increase the supply of funding available to firms in emerging economies, encouraging them to obtain more equity financing to invest and expand. Large firms benefit most from the inflows.
How do firms in Arab countries use equity, corporate bond and syndicated loan markets to obtain finance? This column reports research that provides a first documentation of issuance in domestic and international markets over a 25-year period from the early 1990s.