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This study attempts to analyze the impact of trade and financial liberalization on idiosyncratic risk of firms based on industry sectors. The results of the study revealed a number of salient features and characteristics of emerging economies such as China and Malaysia, which are the subjects of this study. The empirical findings indicate that Malaysian firms are more susceptible to liberalization activities as compared to firms in China. Furthermore, both trade and financial liberalization are more beneficial to Malaysian firms as compared to firms in China. The results also indicate that financial liberalization does not provide as many benefits to most industry sectors in China. The empirical evidence also stipulates that even though Malaysian economic sectors are more heavily influenced by financial and trade liberalization, China's economy could be positively impacted as a result of an increase in trade liberalization efforts.
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