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Determinants of stock exchange integration: evidence in worldwide perspective

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  • Ekaterina Dorodnykh

Abstract

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 ofde jurestock 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.

Suggested Citation

  • Ekaterina Dorodnykh, 2014. "Determinants of stock exchange integration: evidence in worldwide perspective," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 41(2), pages 292-316, March.
  • Handle: RePEc:eme:jespps:v:41:y:2014:i:2:p:292-316
    DOI: 10.1108/JES-08-2012-0111
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    Citations

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    Cited by:

    1. Yang, Ann Shawing & Pangastuti, Airin, 2016. "Stock market efficiency and liquidity: The Indonesia Stock Exchange merger," Research in International Business and Finance, Elsevier, vol. 36(C), pages 28-40.
    2. Sithole, Rumbidzai Praise & Eita, Joel Hinaunye, 2020. "A test of integration between the South African and selected African stock markets," MPRA Paper 101301, University Library of Munich, Germany.
    3. Domingo Rodríguez Benavides & César Gurrola Ríos & Francisco López Herrera, 2021. "Dependencia de los mercados de valores de Argentina, Brasil y México respecto del estadounidense: Covid19 y otras crisis financieras recientes," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(3), pages 1-18, Julio - S.

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