Self-Regulation and Stock Listing Decision of Banks

This paper studies the banks' decisions to self-regulate their activities and their selection of the financial markets where they raise their capital. We show that in an economy with a single financial market, self-regulation increases investors' demand for banks' stocks while weaker bank concentration reduces incentives to self-regulate. In addition, in an economy with separate financial markets, banks preferably raise capital in financial markets hosting larger number of investors. However, when self-regulation costs vary across financial places, banks may list their stocks in the country with the smaller number of investors.