Discussion Paper Details

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Title: Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres

Author(s): Stijn Claessens, Daniela Klingebiel and Sergio Schmukler

Publication Date: April 2002

Keyword(s): ADRs, cross-listing, emerging economies, GDRs, internationalization of financial markets, stock exchange development and trading migration

Programme Area(s): Financial Economics

Abstract: We study the determinants of stock market development and the growing migration of capital raising, listing and trading activity to international exchanges. Economies with higher income per capita, sounder macro policies, more efficient legal systems with better shareholder protection, and more open financial markets have larger and more liquid markets. As such fundamentals improve, however, the degree of migration to international exchanges also increases. This leads to gains for corporations in the form of lower costs, better terms and more liquidly-traded shares. Fully-fledged local stock exchanges are thus becoming less necessary for many economies. Furthermore, migration can leave too little domestic activity to sustain a local exchange. Therefore, the functions and forms of stock exchanges in many economies need to be rethought.

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Bibliographic Reference

Claessens, S, Klingebiel, D and Schmukler, S. 2002. 'Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres'. London, Centre for Economic Policy Research.