Stock Exchange Consolidation and Cross-Border Investment: An Empirical Assessment
71 Pages Posted: 17 Jan 2017 Last revised: 21 Dec 2020
Date Written: September 1, 2017
This paper investigates the effects of stock exchange consolidation on foreign portfolio holdings. Sharing a common stock exchange platform enhances cross-border investments, and the consolidation effect is particularly pronounced among member countries that are smaller in size and closer in geographical, cultural and economic terms. These findings survive different econometric specifications and outlier treatments. After accounting for endogeneity of the consolidation process, the effect of exchange consolidation on cross-border investment is confirmed.
Keywords: Stock Exchange Consolidation, International Portfolio Investments, Familiarity and Gravity Factors, Financial Regulation
JEL Classification: G11, G15, G30
Suggested Citation: Suggested Citation