The purpose of this paper is to discuss and apply some of the key issues and lessons from similar privatization in other parts of the world to the partial privatization of the Bank of China Hong Kong (BOCHK). The empirical results of this paper indicate that some of the banks and non-bank financial institutions reacted negatively to the partial privatization announcements of the BOCHK. The empirical results also show that HSBC, the largest bank in Hong Kong had no significant reaction to the restructuring announcement or the listing announcement of the BOCHK. However, the Hang Seng Bank, the third largest bank in Hong Kong, suffered a loss after the announcement of the BOCHK listing. Compared with the banks and non-bank financial institutions in China, the BOCHK over-performed the rival firms in Mainland China 1year after its partial privatization.

We examine the influence of the European Monetary Union (EMU) on the dynamic process of stock market integration over the period 2 January 1989–29 May 2003 using a bivariate EGARCH framework with time-varying conditional correlations. We find that there has been a clear regime shift in European stock market integration with the introduction of the EMU. The EMU has been necessary for stock market integration as unidirectional causality was found. Linear systems regression analysis shows that the increase in both regional and global stock market integration over this period was significantly driven in part, by macroeconomic convergence associated with the introduction of the EMU and financial development levels.