Does financial liberalization improve the allocation of investment? Micro-evidence from developing countries

摘要

Using firm level panel data from 12 developing countries we explore whether financial liberalization improves the efficiency with which investment funds are allocated. A summary index of the efficiency of investment allocation that measures whether investment funds are going to firms with a higher marginal return to capital is developed. We examine the relationship between this and various measures of financial liberalization and find that liberalization increases the efficiency with which investmentfunds are allocated. This holds after various robustness checks and is consistent with firm level evidence of a stronger association between investment and fundamentals after financial liberalization.