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Ajit Singh, Mr. Rudolph Matthias, and Mr. Jack D. Glen

relatively short periods we are examining. (c) However, it is also possible that, even in the short term, there may be undershooting or overshooting of equilibrium rates of return. In the short term, there are plausible reasons to suggest that liberalization may increase rather than decrease the cross-section variation. For example, before liberalization firms may have a cozy relationship with more or less similar profits. Liberalization may change this pattern and, in the initial stages, we may observe an increased dispersion of rates of return. But in the longer term

Ajit Singh, Mr. Rudolph Matthias, and Mr. Jack D. Glen
This large empirical study of corporate profitability in emerging markets during the 1980s and 1990s measures the intensity of competition. Data on corporate rates of return, profit margins, and output-capital ratios reveal that the recent liberalization has been associated with reduced corporate profit margins and improved capital utilization efficiency. The paper also analyzes persistency in corporate profitability and finds that competitiveness was no less intense in developing countries than in advanced countries. Although the paper is not directly concerned with the Asian crisis, it provides evidence on important structural hypotheses about the crisis.
Ajit Singh, Mr. Rudolph Matthias, and Mr. Jack D. Glen
Mr. Sergio L. Schmukler and Mr. Esteban Vesperoni

section, we studied the effect of financial liberalization on financing choices. However, countries with varying degrees of domestic financial development might be affected differently by financial liberalization. Firms from countries with developed domestic financial systems are expected to see relatively few changes after gaining access to world capital markets. Whereas, companies from countries with underdeveloped domestic financial markets likely face more changes in their financing opportunities as financial sectors are liberalized. We test whether domestic

Mr. John M Montgomery

not connected to a conglomerate decreased. Goeltom also finds that after the interest rate increase that accompanied liberalization, firms that were not entirely self-financed were more efficient, suggesting that the liberalization increased the efficiency of the allocation of investment. The development of the stock market has positive implications for growth in Indonesia. A stock market is a necessary component of the development of sources of finance for risky investments in growing sectors of the economy. While venture capital so far plays a small role, the

RENÉ SMITS

road to liberalizing capital transactions with the outside world can only be agreed unanimously. Thus, the thrust of the new law is clear: Europe is the only jurisdiction to liberalize financial transfers unilaterally in a constitutional text. The inclusion of reciprocity provisions in the Second Banking Directive has served a dual purpose: first, it has helped put financial services liberalization firmly on the agenda of international trade politics; and second, it may help the Community gain access to markets elsewhere on a level similar to what it offers to non

Mr. John M Montgomery

rates and bank credit on enterprise finance (Goeltom, 1995) shows that enterprise borrowing costs increased, but that reliance on internal finance by smaller firms and by firms not connected to a conglomerate decreased. Goeltom also finds that after the interest rate increase that accompanied liberalization, firms that were not entirely self-financed were more efficient, suggesting that the liberalization increased the efficiency of the allocation of investment. The development of the stock market has positive implications for growth in Indonesia. A stock market

Mr. Sergi Lanau and Petia Topalova

firms in regulated sectors, we find a positive association between liberalization and firm growth, size, employment, and productivity. For instance, a one-standard deviation improvement in the PMR is associated with 9 percent larger firms. We also find evidence of positive downstream effects of liberalization. Firms that use inputs of regulated network industries more intensely, increase their size and productivity relatively more. We also find evidence that deregulation has a stronger positive impact in provinces with more efficiently provided public services

Mr. Sergi Lanau and Petia Topalova
This paper examines the role of removing obstacles to competition in product markets in raising growth and productivity. Using firm-level data from Italy during 2003–13 and OECD measures of product market regulation, we estimate the effect of deregulation in network sectors on value added and productivity of firms in these sectors, as well as firms using these intermediates in their production processes. We find evidence of a significant positive impact. These effects are more pronounced in Italian provinces with more efficient public administration, underscoring the complementarities of advancing public administration and product market reforms simultaneously.
Mr. Sergio L. Schmukler and Mr. Esteban Vesperoni
This paper studies the relation between firm's financing choices and financial globalization. Using an East Asian and Latin American firm-level panel for the 1980s and 1990s, we study how leverage ratios, debt maturity structure, and sources of financing change when economies are liberalized and when firms access international capital markets. We find that debt-equity ratios do not increase after financial liberalization. Debt maturity shortens for the average firm when countries undertake financial liberalization. However, domestic firms that actually participate in international capital markets extend their debt maturity. Financial liberalization has less effects on firms from countries with more developed domestic financial systems. Leverage ratios increase during crises.