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Anatomy of a regulatory race to the top: Changes in delisting rules at Korea's two stock exchanges, 1999-2002

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Author Info

  • Dewenter, Kathryn L.
  • Kim, Chang-Soo
  • Novaes, Walter

Abstract

One dimension of competition among stock exchanges is the quality of products they have to offer. In order to attract listings and trading volume, exchanges can affect the quality of their listed firms by altering their standards for firm disclosure and governance. We identify a competition with respect to delisting standards between Korea's two stock exchanges and show that it complies with the three components of a regulatory race to the top: external trigger, mobility among diverse regimes and meaningful changes that converge to similar rules. The race between the two Korean exchanges ended with stricter rules and better protected minority shareholders. The race also ended, however, with neither exchange gaining market share with respect to trading volume or new listings. Korea's experience, therefore, suggests a reason why these races are rare. In the absence of an external trigger, exchanges will be reluctant to enter a race if they think it will result in rule convergence and no winner.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 16 (2010)
Issue (Month): 4 (September)
Pages: 456-468

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Handle: RePEc:eee:corfin:v:16:y:2010:i:4:p:456-468

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Web page: http://www.elsevier.com/locate/jcorpfin

Related research

Keywords: Race to the top Competition among exchanges Governance regulations Korea;

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Cited by:
  1. Kim, Abby, 2014. "The value of firms' voluntary commitment to improve transparency: The case of special segments on Euronext," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 342-359.

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