"We confront the two opposing views of capital account liberalization in developing countries with a new firm-level dataset on investment, stock prices, and sales. In the three-year period following liberalizations, the growth rate of the typical firm's capital stock exceeds its...

In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 4.1 percentage points. Cross-sectional changes in investment are significantly correlated with the signals about fundamentals...

When countries liberalize their stock markets, firms that become eligible for purchase by foreigners (investible), experience an average stock price revaluation of 10.4 percent. Since the covariance of the median investible firm's stock return with the local market is 30 times larger than its...