The reasons behind this phenomenon are the decreasing expectations of investors as to the expected rate of return that compensates the assumed risk. At the same time, better transparency of enterprises (monitoring of the senior management, supervision over shareholders, and making them subject to the market discipline) entails a decrease in the agency costs that result from the mismatch of investment objectives between the management and the shareholders. As a consequence, enterprises can more easily raise funds for financing their initiatives. 7 Large companies are more inclined to promote regulations and laws that improve the transparency of financial markets and reduce the asymmetry of information among market participants. In addition, institutional reforms that improve the market transparency and the quality of communicated information are implemented, under the influence of investors. The deregulation that is taking place removes artificial market entry barriers and facilitates their smooth operation. Thus, globalization stimulates the financial market development, which in turn gives enterprises easier access to capital. Higher availability of funds may impact investments and in this way stimulate the economic growth. 8 Introduction of the euro has eliminated the FX risk and contributed to abolition of investment limits related to the items of securities portfolio denominated in foreign currency. This has lowered the cost of raising capital from 0.5 to 3 percentage points. At the same time, the convergence of those costs took place among the EU-15 within the same economy sectors.

Uniform and commonly applicable standards lower the cost of acquisition and analysis of information and reinforce the financial system stability. The most significant standards include, inter alia, the following: •  the principles of effective banking supervision, drawn up by the Basel Committee on Banking Supervision (BCBS),  •  international accounting standards, over 100 countries have adopted or based their own accounting standards on the International Accounting Standards (IAS) or the International Financial Reporting Standards (IFRS),  •  master agreements on executing transactions on the interbank market ― ISDA, ISMA,  •  statistical methodologies elaborated by, inter alia, the IMF, the BIS, and the WB that ensure compliance of the data gathered with the statistical guidelines and their international comparability,  •  the principles of best practice, elaborated by professional associations of financiers. The development of the modern financial market infrastructure has also covered regulatory changes (e.g. the bankruptcy law) and the establishment of modern transactional systems, payment systems, settlement systems, risk management systems, and information services – such as Reuters or Bloomberg. Stock exchanges and brokers have created modern trading platforms which enable  3  Hannoun H. “Internalisation of financial services: implications and challenges for central banks”, speech at the 41 Conference of the South East Asian Central Banks (SEACEN), Brunei Darussalam, 4 March, 2006. BIS Review 60/2006  st  7  prompt offer-matching, executing transactions and straight through processing. Development of the infrastructure has removed barriers to further market globalization.