Title: Does Mobile Communication Technology Have Capital Market Consequences? Evidence from Worldwide Launches of 3G Networks

Authors: Jinshuai Hu (Xiamen University), Yongtae Kim (Santa Clara University), Siqi Li (Santa Clara University), Yibing Wu (Xiamen University)

Abstract: Exploiting the staggered launches of third-generation mobile broadband (3G) networks across a sample of 40 economies between 1999 and 2012, we examine the capital market consequences of advances in mobile communication technology. Using a composite measure of market liquidity and a welfare-based measure of price informativeness, we find that the 3G introduction is followed by a significant increase in market liquidity and price informativeness. Importantly, the 3G effects are evident only for firms in economies that have characteristics of a well-functioning market: transparent accounting information, a large base of investors participating in the market, and strong legal protection of shareholder rights. We also find a stronger 3G effect in economies where more investors access and use mobile broadband internet. There is, however, no evidence of post-3G increases in noise trading, price bubbles, or mispricing. Collectively, our findings are consistent with worldwide 3G introduction improving the overall economic welfare of market participants.