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Since the 1970s, the world has embarked on a new financial globalization era. Cross-country capital flows have significantly increased in developed and developing countries. However, the characteristics of financial globalization differ from what was originally expected. Various examples illustrate this point. Although the literature predicted large gains from financial globalization (such as additional funding, broad diversification, and deeper financial systems), the positive effects have been more limited. In developed and developing countries, financial globalization has manifested in increasing gross capital flows (inflows and outflows) rather than larger net flows. Capital markets are segmented and only a few large firms access international markets. International institutional investors do not seem to have played a stabilizing role, helping to exacerbate and transmit crises across countries. Although financial globalization has brought several beneficial changes, its net effects and spillovers to the overall economies participating in it have yet to be understood.

Capital Flows --- Developing Countries --- Emerging Markets --- Institutional Investors --- International Capital Markets --- International Integration

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During the past decades, firms from emerging economies have significantly increased the amount of financing obtained in capital markets. Whereas the literature argues that international markets have been an important contributor to this process, the role of domestic markets is mostly unknown. By examining the case of East Asia, this paper shows that domestic markets have been a key driver of the observed trends in capital market financing since the early 2000s. As domestic markets developed, more and smaller firms gained access to equity and corporate bond financing. Domestic markets also helped some corporations to diversify funding sources and obtain domestic currency financing. Policy reforms following the Asian Financial Crisis accompanied the growth of domestic markets. Part of the reforms were aimed at developing domestic capital markets for small and medium-size enterprises. Although these markets have developed significantly, they still serve relatively few corporations, albeit from new sectors.

Asian Financial Crisis --- Corporate Bond Markets --- Corporate Financing --- Finance and Financial Sector Development --- Global Financial Crisis --- International Financial Markets --- SME Capital Markets --- Stock Markets --- Syndicated Loan Markets