Legal harmonization, institutional quality, and countries’ external positions: A sectoral analysis

Franziska Bremus and Tatsiana Kliatskova

Journal of International Money and Finance, 2020, vol. 107, issue C

Abstract: Motivated by the action plan for a European capital markets union (CMU), this paper analyzes the potential for legal harmonization and convergence in institutional quality to affect capital market integration. Based on hand-collected data on the implementation of EU-directives, our analysis yields three key insights. First, legal harmonization promotes portfolio equity holdings. Second, discrepancies in institutional quality matter primarily for cross-border debt positions. Third, the relationship between external investments and harmonization varies significantly across sectors: the non-bank financial corporations, which account for a large share of portfolio positions, react more to institutional harmonization than do banks and the non-financial private sector.

Keywords: Capital market integration; Legal harmonization; Sectoral effects (search for similar items in EconPapers)
JEL-codes: E02 F21 G15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Legal harmonization, institutional quality, and countries’ external positions: A sectoral analysis (2020)
Working Paper: Legal Harmonization, Institutional Quality, and Countries' External Positions: A Sectoral Analysis (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:107:y:2020:i:c:s026156062030173x

DOI: 10.1016/j.jimonfin.2020.102217

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