Transparency and International Portfolio Holdings




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    • International Monetary Fund, Washington, D.C. The authors wish to thank the editor, an anonymous referee, Torbjörn Becker, Przemek Gajdeczka, Petra Geraats, Graciela Kaminsky, Anna Meyendorff, Hunter Monroe, Anthony Richards, and René Stulz for detailed comments on earlier drafts. Discussions with Philippe Bacchetta, Andrew Berg, Patrick Bolton, Nigel Chalk, Tito Cordella, Kristin Forbes, Douglas Gale, Simon Johnson, Leora Klapper, Philippe Martin, Paolo Mauro, Alessandro Prati, Roberto Rigobon, David Robinson, Nouriel Roubini, Antonio Spilimbergo, and seminar participants at the IMF, Vanderbilt University, the CEPR, the NBER, the Fourth Annual Conference on Financial Development in Emerging and Transition Economies, and the LAEBA Conference on Globalization also helped to improve the paper. In addition, the authors are grateful to Peter Allum and Amadou Sy for sharing data. Neşe Erbil and Chi Nguyen provided excellent research assistance. The views in the paper are the authors' own and do not necessarily represent those of the IMF or any other organization that they are or have been associated with.


Does country transparency affect international portfolio investment? We examine this question by constructing new measures of transparency and by making use of a unique microdata set on portfolio holdings of emerging market funds around the world. We distinguish between government and corporate transparency. There is clear evidence that funds systematically invest less in less transparent countries. Moreover, funds have a greater propensity to exit nontransparent countries during crises.