Transgovernmental Networks and Domestic Policy Convergence: Evidence from Insider Trading Regulation

Cross-border cooperation among domestic regulators and public officials has become a defining feature of global governance. While a number of studies have tracked the emergence and institutionalization of such transgovernmental networks, less is known about their effect on domestic policy. This study explores this link for the important case of insider-trading regulation in original data for I 16 countries between 1977 and 2006. It offers quantitative evidence that transgovernmental cooperation is related to domestic policy convergence but that the relationship is more complex than often assumed. Direct ties to powerful regulators increases a jurisdiction's likelihood of adopting internationally promoted policies such as insider-trading rules. Separately, membership in the International Organization of Securities Commissions (IOSCO), a forum designed to diffuse best practices among regulators, increases a jurisdiction's likelihood of subsequently enforcing newly adopted policies. The findings in this study suggest that different network components are associated with distinct aspects of domestic policy convergence. The results are directly relevant for current public policy debates about the reregulation of global financial markets as transgovernmental networks among domestic regulators have assumed a critical role.