Craig Doidge is Professor of Finance at the University of Toronto; G. Andrew Karolyi is the Harold Bierman, Jr. Distinguished Professor of Management at the Cornell University SC Johnson Graduate School of Management; and René M. Stulz is the Everett D. Reese Chair of Banking and Monetary Economics at the Fisher College of Business at The Ohio State University. This post is based on their recent paper.
Before the 2008 global financial crisis (GFC), it seemed that financial globalization was increasing inexorably. For financial economists, one natural indicator of financial globalization is the extent to which similar firms are valued similarly across the globe. In a world of perfectly integrated financial markets, the same firm should be valued the same everywhere. Before the GFC, valuations had not fully converged, but there is much evidence that the forces of globalization affected valuations, if not across the globe, then at least within the world of developed economies.
In our paper, Is Financial Globalization in Reverse after the 2008 Global Financial Crisis? Evidence from Corporate Valuations?, available at SSRN, we investigate whether the forces of financial globalization weaken after the 2008 global financial crisis (GFC) by assessing how the valuations of non-US firms evolve relative to the valuations of comparable US firms from before to after the GFC. Our evidence says that financial globalization is indeed in reverse after the 2008 global financial crisis but not necessarily in a way one may have expected.
