limits of financial globalization
By: René M. Stulz.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 11070.; Working paper series (National Bureau of Economic Research) -- working paper no. 11070.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 59
Subjects: Investments, Foreign -- Econometric models
Description: "Despite the dramatic reduction in explicit barriers to international investment activity over the last 60 years, the impact of financial globalization has been remarkably limited. I argue that country attributes are still critical to financial decision-making because of what I call the twin agency problems. These twin agency problems arise because rulers of sovereign states and corporate insiders pursue their own interests at the expense of outside investors. When these twin agency problems are significant, diffuse ownership is inefficient and corporate insiders must co-invest with other investors, retaining substantial equity. The resulting ownership concentration limits economic growth, financial development, and the ability of a country to take advantage of financial globalization. The twin agency problems help explain why the impact of financial globalization has been limited and why financial globalization can lead to capital flight and financial crises. The impact of financial globalization will remain limited as long as these agency problems are significant"--National Bureau of Economic Research web site.
Notes: "January 2005."

Includes bibliographical references (p. 48-52).

Also available in PDF from the NBER world wide web site (www.nber.org).