The relaxation of foreign ownership limits and market integration: the case of Thailand Available to Purchase

The Thai stock market maintains two separate listings for common stocks which have reached foreign ownership limits. Prices on the Foreign Board are typically traded at a premium relative to prices on the Main Board. The price premium is both a measure and evidence of market segmentation. Thai commercial banks were faced with financial and operational difficulties in the wake of the 1997 financial crisis. To rescue the banking industry, the Thai government relaxed the foreign ownership limit for a ten‐year period. We show in this paper that the Thai banking industry was segmented before the crisis; but when the foreign ownership limits were removed, the banking industry was integrated.