may not necessarily translate to improved access to financing if market concentration remains high. Hence, this study also examines if and how concentration changes as markets grow.

Understanding issuer composition is important to gauge how effective capital markets are in meeting the range of financing needs across the economy. Additionally, a more inclusive market can be beneficial in itself, providing further motivation to study the topic. For example, it can help to improve capital market resilience (Xing, 2004). Volatility in the market may increase if there are only a handful of dominant firms or if listed firms are concentrated in just a few sectors. Lack of a broad and diverse issuer base also makes capital markets less attractive to investors as it becomes more difficult to achieve low-cost diversification - one of the key advantages of capital markets. Moreover, it has implications for the real economy as research shows that equity markets are essential in providing financing to more innovative and high-growth firms as well as longerterm projects (Didier et al., 2020; Bae et al., 2021). When stock markets are restrictive, such firms and projects are unable to get funding, which in turn stifles innovation and productivity in the economy.

This paper studies the relationship between stock market growth and changes in issuer composition. Stock market growth is captured along two dimensions: market size (proxied by stock market capitalization) and market activity (proxied by trading activity and stock turnover ratio). We study the relationship of these market growth indicators with different aspects of issuer composition, which include the number of listed firms, issuer concentration, and sectoral diversity. Additionally, we examine the number and average size of initial and seasoned equity offerings to understand how equity issuances change as stock markets grow.

Our paper relies on a novel dataset assembled by the International Finance Corporation (IFC) that captures stock market data from over 150 countries for the period 2015-2020. We employ a crosscountry fixed effects panel to uncover relationships between stock market growth and issuer composition. Our results show that stock market capitalization, often the most popular headline indicator for stock market development, does not necessarily reflect broader firm participation. Instead, a growing stock market tends to be related to an increase in the number and size of seasoned equity offerings, indicating growth at the intensive margin. Greater trading activity, however, is associated with entry of new issuers in the stock market.

These findings also hold for a subsample of only low- and middle-income countries. For this group, the paper additionally finds that higher stock turnover is related to lower market concentration, though the magnitude is marginal. This result is of particular relevance given that less developed markets are more likely to be dominated by a few firms. Such markets are also more likely to have a high concentration of listed firms in a handful of industries. Additionally, we examine the sectoral diversity of equity issues but do not find any evidence that this improves as stock markets increase in size and activity. It is important to note that our results do not capture causal 3