Does regulatory cooperation help integrate equity markets?

This study tests whether cooperation between securities regulators influences global mar-ket integration. I measure cooperation using arrangements between securities regulators that enable enhanced cross-border enforcement, better regulatory decisions, and reduced compliance obligations for cross-border activities. These arrangements-formed at different times for different country pairs-are associated with an 11% increase in cross-border in-vestment. I find similar increases using other proxies for market integration. Cross-border investment and market integration thus depend, in part, on regulators working together to extend legal and institutional capacities across borders. This reframes our understanding of the role of institutions in global capital markets. (c) 2021 The Author. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/ )

Automated summary

Cooperation between securities regulators has a positive impact on global market integration and cross-border investment growth. Extending legal and institutional capacities across borders reduces compliance costs and drives market integration.