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Preliminary: comments welcome; please do not cite or quote without permission. Who Gains from Capital Controls? Evidence from Malaysia

By Simon Johnson, Todd Mitton, Sendhil Mullainathan, Raghuram Rajan, Dani Rodrik and David Scharfstein


The stock prices of politically connected Malaysian firms fell disproportionately in the early stages of the Asian financial crisis but rose more than the market once capital controls were imposed in September 1998. Capital controls primarily benefited wellconnected firms without access to international capital markets. These results hold for both financial and non-financial firms separately and are robust to controlling for firm size, sector, profitability, pre-crisis growth and whether a firm is favored because it is officially Bumiputera (with ethnic Malay ownership over 50%). Our findings are consistent with the view that capital controls provide a screen behind which politicians can support particular firms

Year: 2001
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