Review of Financial Studies Vol. 29 No. 11 2016

Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement

Hans Bonde Christensen^{1,2,3,4,5,6,7,8,9,10,11}; Luzi Hail^{3,2,8,7,1,5,9,4,6,10,11}; Christian Leuz^{10,2,3,11,6,4,5,1,9,8,7}

¹ University of Zurich · ² University of Chicago · ³ Bocconi University · ⁴ Chinese University of Hong Kong · ⁵ Temple University · ⁶ Vienna University of Economics and Business · ⁷ University of Michigan–Ann Arbor · ⁸ University of Colorado Boulder · ⁹ University of Pennsylvania · ¹⁰ University of Rochester · ¹¹ Manchester University

Abstract

We examine the capital-market effects of changes in securities regulation in the European Union aimed at reducing market abuse and increasing transparency. To estimate causal effects for the population of E.U. firms, we exploit that for plausibly exogenous reasons, such as national legislative procedures, E.U. countries adopted these directives at different times. We find significant increases in market liquidity, but the effects are stronger in countries with stricter implementation and traditionally more stringent securities regulation. The findings suggest that countries with initially weaker regulation do not catch up with stronger countries, and that countries diverge more upon harmonizing regulation. (

DOI

10.1093/rfs/hhw055

Volume

29

Issue

11

Pages

2885-2924

Language

en

Sources

openalex crossref

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