Anand B., Galetovic A. (2002).

Investment banking and security market development: why is Chile different from the United States. Harvard University, Boston.



There is vast evidence that in developed security markets, particularly the United States, firms access “direct” markets through investment banks with whom they establish long-term relationships. By contrast, we present evidence from a small emerging economy—Chile—which suggests that local intermediaries do not establish relationships with firms but rather engage in “arm’s length” investment banking. This does not affect conglomerates and large Chilean firms very much, because they list abroad and directly establish relationships with global investment banks. Nevertheless, firms that are not large enough to list abroad have a much harder time in accessing the capital market, particularly to finance fast growth. We argue that local relationships are missing because in the Chilean market few firms generate large trading and deal volumes.