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The regulatory ties that bind markets : the political economy of cross-border integration in the exchange industry Gravelle, Matthew Joseph

Abstract

This dissertation considers cross-border integration from the perspective of financial market regulators. It analyzes market authorities’ responses to the phenomenon of cross-border mergers and acquisitions in financial services, particularly involving exchanges. In some instances, regulators have approved these proposals, but in others they have intervened, even blocking proposals in high-profile decisions. This variation is puzzling and cannot be accounted for by standard explanations, including regime type or political pressures on regulators. When do officials interfere in the market for corporate control of financial service firms, and why? To explain this variation, the dissertation develops a theory of regulator dependence that focuses on the relationship between regulators and firms. The theory considers the conditions under which regulators’ preferences are insulated from social and political pressures, where regulators can act on their own preferences regarding integration. These preferences are a function of regulators’ dependence on firms’ cooperation and compliance to deliver on desired public policy outcomes. Mergers are threatening where regulators depend on a merging firm, and in these contexts regulators interfere with integration proposals. This dependence is a consequence of historical policy outcomes shaping the structure of the market and the allocation of regulatory authority. Empirical analysis of ten cases corroborates the theory’s predictions. The theory of regulator dependence establishes the analytical and empirical significance of considering regulators’ discrete views about market integration in order to explain certain financial market outcomes. In doing so, the dissertation contributes to our understanding of the conditions under which cross-border market integration is more or less politically feasible, and adds nuance to the established view that the historical development of domestic markets has significant and systematic effects on international market integration.

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Attribution-NonCommercial-NoDerivatives 4.0 International

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