TAILIEUCHUNG - DOES GROWTH & QUALITY OF CAPITAL MARKETS DRIVE FOREIGN CAPITAL ?

Innovation is not only about inputs, however. A region’s economy must translate these inputs into productive outcomes: employment in high-technology firms, greater output per worker, the creation of patents, to name a few. By examining the output indicators, one can explore how well your economy converts innovation inputs into performance. Because the index is not dealing with simple linear relationships, there is no direct cause-and-effect connection between inputs and outputs. The innovation index is designed to show the innovation process more clearly. The tool, in general, lets the practitioner explore innovation within your region by guiding questions and conversations. | TURKISH ECONOMIC ASSOCIATION DISCUSSION PAPER 2008 5 http . DOES GROWTH QUALITY OF CAPITAL MARKETS dRiVE foreign CAPITAL Juan P. Chousa Artur Tamazian Krishna C. Vadlamannati March 2008 Does Growth Quality of Capital Markets drive Foreign Capital The case of Cross-border Mergers Acquisitions from leading Emerging Economies Juan Pineiro Chousa a Artur Tamazian a Krishna Chaitanya Vadlamannati a b efjpch@ oartur@ kc_dcm@ a University of Santiago de Compostela Spain ABSTRACT Is there any interrelationship between firm level FDI in the form of cross border Mergers Acquisitions and capital markets growth and quality We addressed this question using panel data of cross border M A for nine emerging economies. Our study period goes from 1987 to 2006. We find that the stock market variables viz. capitalization and value addition encourage the number of deals and value of cross border Mergers Acquisitions. However the association with regulatory and financial reforms is much stronger and robust. We then interact both the stock market variables with financial and regulatory reforms variables only to find much stronger results. The coefficients proved to be higher than other variables suggesting that higher reforms in capital markets could increase firm level FDI. Moreover the results are found to be extremely robust when we replace stock market variables with squared values of the same reiterating the fact that larger is the growth greater is the inflow of firm level FDI in the form of cross border Mergers Acquisitions. KEYWORDS Financial Markets Cross border M A Emerging Economies. JEL CODES E44 M16 O53 O54 O55 b Corresponding author. Tel. 34 664516430 1 1. Introduction To assess whether stock markets are simply known to be mother of all speculative businesses or whether they are importantly linked to attract firm level FDI in the form of cross-border Mergers Acquisitions activities we soothe the existing literature and present new .

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