The Politics of Equity Finance in Emerging Markets

In This Review

The Politics of Equity Finance in Emerging Markets

By Kathryn C. Lavelle
Oxford University Press, 2004
296 pp. $74.50
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Equity markets have grown rapidly around the world, particularly in developing countries. This growth has been fostered partly by privatization of state-owned enterprises, partly by a desire for new capital other than debt, and partly by international financial institutions, especially the International Finance Corporation (IFC) of the World Bank. But as Lavelle makes clear, the term "stock market" means much less in most countries than the label seems to imply. Experience across countries is diverse; stock-issuing firms in many countries remain controlled by small groups of local investors (or by the government), "corporate governance" is far from the (still imperfect) practices in the United Kingdom and the United States, corporate accounts are unreliable, and protection for minority shareholders is rudimentary to nonexistent. In short, stock markets are often mechanisms for insiders to fleece outsiders, as they were not so long ago in many European countries. Despite its occasional lapses into jargon, this book usefully recounts the recent evolution of equity markets in 16 emerging economies, summarizes the nature and extent of privatization in many countries, and discusses the role of the IFC in fostering equity markets since the 1960s.