China USA Business Review2011 1011 (original) (raw)

This paper analyzes how the introduction of the euro has affected the degree of integration of European stock markets. Particular emphasis is given to whether stock market integration (which has taken the form of merger processes, cooperation agreements and common trading procedures under a rational paradigm shaped by globalisation and technological innovation) between Economic and Monetary Union member states is limited by the judicial and political hesitancy of those states. The paper uses the theory of international economic integration as its base. Its aim is twofold: (1) It analyses the economic, political and cultural costs and benefits arising from the integration of European stock markets; and (2) It also evaluates the impact of political factors on the process of integration as well as the implications of stock market integration for EU member states. Empirical evidence suggests that globalisation and technological advances have resulted in greater integration of European stock exchanges as part of an overarching trend of international stock market integration, which has led to two parallel processes: greater competition between financial centres in member states in a bid to attract capital, as well as a need for a progressive ceding of sovereignty by member states to facilitate the convergence of fiscal, regulatory and supervisory infrastructure.