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Does Regulatory Harmonization Increase Bilateral Asset Holdings?

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  • Vlachos, Jonas

    ()
    (The Research Institute of Industrial Economics)

Abstract

By combining new data on bilateral asset holdings with data on securities regulation in an empirical gravity model, it is found that bilateral differences in securities regulation lead to decreased portfolio holdings. Hence, regulatory harmonization can foster financial integration. The results are especially strong for equity holdings. It is verified that the results do not just reflect general economic, institutional, and cultural differences. Additional analysis of causality shows the exogenous component of asset holdings to be associated with larger differences in securities regulation. This might suggest that regulatory differences are used to protect domestic capital markets from outside competition.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 612.

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Length: 39 pages
Date of creation: 05 Mar 2004
Date of revision:
Handle: RePEc:hhs:iuiwop:0612

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Keywords: Cross-Border Portfolio Investments; Gravity Model; Harmonization; Home Bias; Integration; Securities Regulation;

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Cited by:
  1. Coeurdacier, Nicolas & Guibaud, Stéphane, 2006. "International Portfolio Diversification Is Better Than You Think," ESSEC Working Papers DR 06013, ESSEC Research Center, ESSEC Business School.
  2. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Cultural Biases in Economic Exchange?," Economics Working Papers ECO2007/42, European University Institute.
  3. Giofré, Maela/M., 2009. "Investor protection and foreign stakeholders," MPRA Paper 20238, University Library of Munich, Germany, revised Jan 2010.
  4. Vahagn Galstyan & Philip Lane, 2010. "The Dynamics of Portfolio Holdings in Emerging Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp346, IIIS.
  5. Coeurdacier , Nicolas & Martin, Philippe, 2007. "The geography of asset holdings: Evidence from Sweden," Working Paper Series 202, Sveriges Riksbank (Central Bank of Sweden).
  6. Philip R. Lane, 2008. "The Macroeconomics of Financial Integration: A European Perspective," The Institute for International Integration Studies Discussion Paper Series iiisdp265, IIIS.
  7. Abid, Fathi & Bahloul, Slah, 2011. "Selected MENA countries' attractiveness to G7 investors," Economic Modelling, Elsevier, vol. 28(5), pages 2197-2207, September.
  8. Giofré, Maela, 2013. "Investor protection rights and foreign investment," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 506-526.
  9. Giofré, Maela, 2013. "International diversification: Households versus institutional investors," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 145-176.
  10. Barbara Berkel, 2004. "Institutional Determinants of International Equity Portfolios - A Country-Level Analysis," MEA discussion paper series 04061, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.

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