Determinants of stock exchange integration: evidence in worldwide perspective

摘要

Purpose - This paper contains an empirical analysis of determinants of international integration projects over the time period 1995-2010. After a broad discussion of the existent literature, the investigation combines a large number of potentially relevant determinants for the explanation of whether stock exchanges are participating in formal integration projects. The paper aims to discuss these issues. Design/methodology/approach - The methodology is based on multistage statistical data analysis, using correlation and cluster analyses to investigate the presence of integration trend between existing stock exchange projects, while multivariable logit regression examines the determinants of stock exchange integration. Findings - The paper confirms empirically the set of drivers of financial integration. Moreover, the paper provides quantitative estimations of probability of stock exchange integration estimated for different explanatory variables. The paper demonstrates that financial harmonization, cross-membership-agreements, for-profit corporate structure, trading engine and regional integration are important drivers of stock exchange integration. By contrast, high size of stock exchange market has negative impact on the likelihood of successful merger. This result is, especially, important in terms of financial regulation. Practical implications - Results highlight the importance of stock exchange market in terms of exposure to systemic shocks and the linkages with the overall size of the economy. Originality/value - The paper contributes to the existing literature and extends the analysis of determinants of stock exchange integration. In particular, the existence of de jure stock market integration projects suggests to design a special regulatory framework in order to benefit the important consequences of the integration phenomenon and to decrease the risk of financial contagion.