IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization

  • RENÉ M. STULZ

As barriers to international investment fall and technology improves, the cost advantages for a firm's securities to trade publicly in the country in which that firm is located and for that country to have a market for publicly traded securities distinct from the capital markets of other countries will progressively disappear. Securities laws remain an important determinant of whether and where securities are issued, how they are valued, who owns them, and where they trade. I show that there is a demand from entrepreneurs for mechanisms that allow them to commit to credible disclosure because disclosure helps reduce agency costs. Under some circumstances, mandatory disclosure through securities laws can help satisfy that demand, but only provided investors or the state can act on the information disclosed and the laws cannot be weakened ex post too much through lobbying by corporate insiders. With financial globalization, national disclosure laws can have wide-ranging effects on a country's welfare, on firms and on investor portfolios, including the extent to which share holdings reveal a home bias. In equilibrium, if firms can choose the securities laws they are subject to when they go public, some firms will choose stronger securities laws than those of the country in which they are located and some firms will do the opposite. Copyright (c), University of Chicago on behalf of the Institute of Professional Accounting, 2009.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=joar&volume=47&issue=2&year=2009&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Wiley Blackwell in its journal Journal of Accounting Research.

Volume (Year): 47 (2009)
Issue (Month): 2 (05)
Pages: 349-390

as
in new window

Handle: RePEc:bla:joares:v:47:y:2009:i:2:p:349-390
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0021-8456

Order Information: Web: http://www.blackwellpublishing.com/subs.asp?ref=0021-8456

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Art Durnev & E. Han Kim, 2005. "To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation," Journal of Finance, American Finance Association, vol. 60(3), pages 1461-1493, 06.
  2. Pagano, Marco, 1986. "Trading Volume and Asset Liquidity," CEPR Discussion Papers 142, C.E.P.R. Discussion Papers.
  3. Andrei Shleifer & Daniel Wolfenson, 2000. "Investor Protection and Equity Markets," NBER Working Papers 7974, National Bureau of Economic Research, Inc.
  4. Durnev, Art & Fauver, Larry, 2008. "Stealing from Thieves: Firm Governance and Performance when States are Predatory," CEI Working Paper Series 2008-12, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  5. Coffee, John C., Jr., 2007. "Law and the Market: The Impact of Enforcement," Working Papers 07-3, University of Pennsylvania, Wharton School, Weiss Center.
  6. Benjamin E. Hermalin & Michael S. Weisbach, 2007. "Transparency and Corporate Governance," NBER Working Papers 12875, National Bureau of Economic Research, Inc.
  7. Craig Doidge & G. Andrew Karolyi & Rene M. Stulz, 2001. "Why are Foreign Firms Listed in the U.S. Worth More?," NBER Working Papers 8538, National Bureau of Economic Research, Inc.
  8. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1999. "Investor Protection and Corporate Valuation," Harvard Institute of Economic Research Working Papers 1882, Harvard - Institute of Economic Research.
  9. Luc Laeven & Ross Levine, 2006. "Complex Ownership Structures and Corporate Valuations," NBER Working Papers 12675, National Bureau of Economic Research, Inc.
  10. Lombardo, Davide & Pagano, Marco, 1999. "Law and Equity Markets: A Simple Model," CEPR Discussion Papers 2276, C.E.P.R. Discussion Papers.
  11. Ian Domowitz & Jack Glen & Ananth Madhavan, 1998. "International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market," Journal of Finance, American Finance Association, vol. 53(6), pages 2001-2027, December.
  12. Helwege, Jean & Pirinsky, Christo & Stulz, Rene M., 2005. "Why Do Firms Become Widely Held? An Analysis of the Dynamics of Corporate Ownership," Working Paper Series 2005-14, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  13. Laura Casares Field & Jonathan M. Karpoff, 2002. "Takeover Defenses of IPO Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1857-1889, October.
  14. Richard Lambert & Christian Leuz & Robert E. Verrecchia, 2007. "Accounting Information, Disclosure, and the Cost of Capital," Journal of Accounting Research, Wiley Blackwell, vol. 45(2), pages 385-420, 05.
  15. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
  16. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  17. Armando Gomes, 2000. "Going Public without Governance: Managerial Reputation Effects," Journal of Finance, American Finance Association, vol. 55(2), pages 615-646, 04.
  18. Choe, Hyuk & Kho, Bong-Chan & Stulz, Rene M., 2004. "Do Domestic Investors Have an Edge? The Trading Experience of Foreign Investors in Korea," Working Paper Series 2004-6, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  19. Leuz, Christian & Oberholzer-Gee, Felix, 2006. "Political relationships, global financing, and corporate transparency: Evidence from Indonesia," Journal of Financial Economics, Elsevier, vol. 81(2), pages 411-439, August.
  20. Peter M. DeMarzo & Michael J. Fishman & Kathleen M. Hagerty, 1998. "The Optimal Enforcement of Insider Trading Regulations," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 602-632, June.
  21. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
  22. Hardman Moore, John & Hart, Oliver, 1985. "Incomplete Contracts and Renegotiation," CEPR Discussion Papers 60, C.E.P.R. Discussion Papers.
  23. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  24. Hail, Luzi & Leuz, Christian, 2009. "Cost of capital effects and changes in growth expectations around U.S. cross-listings," Journal of Financial Economics, Elsevier, vol. 93(3), pages 428-454, September.
  25. Leuz, Christian & Lins, Karl V. & Warnock, Francis E., 2007. "Do Foreigners Invest Less in Poorly Governed Firms?," Working Papers 07-2, University of Pennsylvania, Wharton School, Weiss Center.
  26. Chowdhry, Bhagwan & Nanda, Vikram, 1991. "Multimarket Trading and Market Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 483-511.
  27. Grinblatt, Mark & Keloharju, Matti, 2000. "The investment behavior and performance of various investor types: a study of Finland's unique data set," Journal of Financial Economics, Elsevier, vol. 55(1), pages 43-67, January.
  28. Dahlquist, Magnus & Pinkowitz, Lee & Stulz, René M. & Williamson, Rohan, 2002. "Corporate Governance and the Home Bias," SIFR Research Report Series 11, Institute for Financial Research.
  29. Rene M. Stulz, 2005. "The Limits of Financial Globalization," NBER Working Papers 11070, National Bureau of Economic Research, Inc.
  30. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
  31. Gehrig, Thomas, 1998. "Cities and the Geography of Financial Centres," CEPR Discussion Papers 1894, C.E.P.R. Discussion Papers.
  32. John Ammer & Sara B. Holland & David C. Smith & Francis E. Warnock, 2006. "Look at Me Now: What Attracts U.S. Shareholders?," NBER Working Papers 12500, National Bureau of Economic Research, Inc.
  33. Stulz, Rene M & Wasserfallen, Walter, 1995. "Foreign Equity Investment Restrictions, Capital Flight, and Shareholder Wealth Maximization: Theory and Evidence," Review of Financial Studies, Society for Financial Studies, vol. 8(4), pages 1019-57.
  34. Fama, Eugene F. & French, Kenneth R., 2007. "Disagreement, tastes, and asset prices," Journal of Financial Economics, Elsevier, vol. 83(3), pages 667-689, March.
  35. Shmuel Baruch & G. Andrew Karolyi & Michael L. Lemmon, 2007. "Multimarket Trading and Liquidity: Theory and Evidence," Journal of Finance, American Finance Association, vol. 62(5), pages 2169-2200, October.
  36. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2005. "Insider Trading Restrictions and Analysts' Incentives to Follow Firms," Journal of Finance, American Finance Association, vol. 60(1), pages 35-66, 02.
  37. Diamond, Douglas W & Verrecchia, Robert E, 1991. " Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-59, September.
  38. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
  39. David Easley & Maureen O'hara, 2004. "Information and the Cost of Capital," Journal of Finance, American Finance Association, vol. 59(4), pages 1553-1583, 08.
  40. Utpal Bhattacharya & Hazem Daouk, 2002. "The World Price of Insider Trading," Journal of Finance, American Finance Association, vol. 57(1), pages 75-108, 02.
  41. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
  42. Ayyagari, Meghana & Doidge, Craig, 2010. "Does cross-listing facilitate changes in corporate ownership and control?," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 208-223, January.
  43. Siegel, Jordan, 2005. "Can foreign firms bond themselves effectively by renting U.S. securities laws?," Journal of Financial Economics, Elsevier, vol. 75(2), pages 319-359, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bla:joares:v:47:y:2009:i:2:p:349-390. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.