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Market in Financial Instruments Directive (MiFID), stock price informativeness and liquidity

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  • Aghanya, Daniel
  • Agarwal, Vineet
  • Poshakwale, Sunil

Abstract

The paper examines the impact of MiFID on stock price informativeness and liquidity in 28 EU countries. We find that post-MiFID the stock prices reflect greater firm specific information and the market becomes more liquid. Consistent with the ‘Catch-up Hypothesis’ our evidence shows that the impact of MiFID in terms of price informativeness is greater for countries that have weaker quality of regulation. We find that regulation with enforcement improves market efficiency. Our results are robust with respect to the choice of price informativeness and liquidity proxies as well as the control sample.

Suggested Citation

  • Aghanya, Daniel & Agarwal, Vineet & Poshakwale, Sunil, 2020. "Market in Financial Instruments Directive (MiFID), stock price informativeness and liquidity," Journal of Banking & Finance, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:jbfina:v:113:y:2020:i:c:s0378426619303036
    DOI: 10.1016/j.jbankfin.2019.105730
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    More about this item

    Keywords

    Capital markets; Disclosure regulation; Transaction costs; Bid-ask spread; Propensity score matching;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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