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Journal of Financial Economics Vol. 138 No. 1 2020

Regulatory cooperation and foreign portfolio investment

Mark H. Lang1; Mark G. Maffett2; James D. Omartian3,4; Roger Silvers5

1 University of North Carolina at Chapel Hill · 2 University of Chicago · 3 University of Michigan–Ann Arbor · 4 Ross School · 5 University of Utah

Abstract

We investigate the effect of cross-border regulatory cooperation in the enforcement of securities laws on global-mutual-fund portfolio allocations. Our research design exploits a shock to the Securities and Exchange Commission’s oversight of foreign firms cross-listed on a US stock exchange around the signing of the Multilateral Memorandum of Understanding (MMoU), a non-binding, information-sharing arrangement between global securities regulators. In signatory countries, foreign investment in US-cross-listed firms increases by $110 billion relative to non-cross-listed firms. The strongest effects are for investors facing greater information asymmetries, those from countries closely linked to the US, and non-US foreign investors, suggesting significant spillover effects from international regulatory cooperation.

DOI
10.1016/j.jfineco.2020.04.016
Volume
138
Issue
1
Pages
138-158
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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