Studying a comprehensive sample of stocks from the U.S. OTC market, we show that this market is a large and diverse trading environment with a rich set of regulatory and disclosure regimes, comprising venue rules and state laws beyond SEC regulation. We exploit this institutional richness to show that OTC firms subject to stricter regulatory regimes and disclosure requirements have higher market quality (higher liquidity and lower crash risk). Our analysis points to an important trade-off in regulating the OTC market and protecting investors: lowering regulatory requirements reduces the compliance burden for smaller firms, but it also reduces market quality. Received July 26, 2013; editorial decision July 8, 2017 by Editor Itay Goldstein.

The paper examines whether international regulatory harmonization increases cross-border labor migration. To study this question, we analyze European Union initiatives that harmonized accounting and auditing standards. Regulatory harmonization should reduce economic mobility barriers, essentially making it easier for accounting professionals to move across countries. Our research design compares the cross-border migration of accounting professionals relative to tightly matched other professionals before and after regulatory harmonization. We find that international labor migration in the accounting profession increases significantly relative to other professions. We provide evidence that this effect is due to harmonization, rather than increases in the demand for accounting services during the implementation of the rule changes. The findings illustrate that diversity in rules constitutes an economic barrier to cross-border labor mobility and, more specifically, that accounting harmonization can have a meaningful effect on cross-border migration.