Stock Exchange Consolidation and Cross-Border Investment: An Empirical Assessment

34 Pages Posted: 17 Jan 2017 Last revised: 25 Jan 2018

See all articles by Maela Giofré

Maela Giofré

University of Turin - Department of Economics and Statistics; CeRP-CCA; Netspar

Date Written: September 2017

Abstract

This paper investigates the effects of stock exchange consolidation on foreign portfolio holdings. Stock exchanges consolidation boosts the market capitalization of member countries, as expected. Since member countries' domestic holdings decline, the success of the merger is due to a sharp increase in foreign investment. Our findings highlight that stock exchange consolidation enhances cross-border foreign investments by member countries far beyond what is predicted by larger and deeper markets. The consolidation effect is particularly pronounced among member countries that were less foreign-oriented before the fusion, that are smaller in size, and that feature strong familiarity.

Keywords: Stock Exchange Consolidation, International Portfolio Investments, Familiarity and Gravity Factors, Financial Regulation

JEL Classification: G11, G15, G30

Suggested Citation

Giofré, Maela, Stock Exchange Consolidation and Cross-Border Investment: An Empirical Assessment (September 2017). Asian Finance Association (AsianFA) 2018 Conference, Available at SSRN: https://ssrn.com/abstract=2899436 or http://dx.doi.org/10.2139/ssrn.2899436

Maela Giofré (Contact Author)

University of Turin - Department of Economics and Statistics ( email )

Lungo Dora Siena 100/A
Torino, Turin - Piedmont 10153
Italy

CeRP-CCA ( email )

Via Real Collegio 30
Moncalieri (TO), Turin 10024
Italy

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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