Cross-Listing of Central European Countries

The aim of this thesis is to analyze capital markets integration in Europe. It focuses on the integration of the Central European markets (so-called emerging markets) with the more developed Western markets: the Frankfurt Stock Exchange, the London Stock Exchange. We use data of stock prices from the Central European countries that are cross-listed in London or Frankfurt stock exchanges or both. We begin by explaining the different approaches to financing a company – both domestically and internationally. We then describe in detail the concept of cross-listing that is widely used in order to obtain non domestic sources of finance. We investigate the integration of the emerging markets with the Frankfurt Stock Exchange and the London Stock Exchange using the Granger Causality test of information flows. The results show that there is a strong evidence of unidirectional causality from the local markets to the developed markets in both cases – London and Frankfurt. That indicates the European capital markets are still fragmented.