Trends and key determinants of firm-level integration

We measure market integration at a firm-level for all US companies with the rest of the world. While we observe that integration increased through the years for the US as a whole, there are differences across firms according to their characteristics. Past research indicates that large firms, significant exporters and firms held primarily by institutional investors are more integrated. However, not all characteristics affect integration to the same degree. As such, we characterize the key factors that account for most of the total panel variation of firm-level integration. The corporate spread between BAA and AAA bond indices is the most important variable that determines the level of integration of a stock followed by size, institutional ownership and foreign sales. When we categorize our variables into groups, we find that Macro, Market and Ownership variables matter the most. In general, Macro variables are the primary drivers of US integration levels and have an effect that is larger than any firm characteristic.