Stock Exchange Consolidation and Cross-Border Investment: An Empirical Assessment
34 Pages Posted: 17 Jan 2017 Last revised: 25 Jan 2018
Date Written: September 2017
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: Suggested Citation