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

Author

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  • Hans B. Christensen
  • Luzi Hail
  • Christian Leuz

Abstract

We examine the capital-market effects of changes in securities regulation in the European Union (EU) aimed at reducing market abuse and increasing transparency. To estimate causal effects for the population of EU firms, we exploit that for plausibly exogenous reasons, like national legislative procedures, EU 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.

Suggested Citation

  • Hans B. Christensen & Luzi Hail & Christian Leuz, 2011. "Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement," NBER Working Papers 16737, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16737
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    References listed on IDEAS

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    1. Sebnem Kalemli-Ozcan & Elias Papaioannou & José-Luis Peydró, 2013. "Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity," Journal of Finance, American Finance Association, vol. 68(3), pages 1179-1228, June.
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    Cited by:

    1. Akyol, Ali C. & Cooper, Tommy & Meoli, Michele & Vismara, Silvio, 2014. "Do regulatory changes affect the underpricing of European IPOs?," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 43-58.
    2. Fidrmuc, Jana P. & Korczak, Adriana & Korczak, Piotr, 2013. "Why does shareholder protection matter for abnormal returns after reported insider purchases and sales?," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1915-1935.
    3. repec:eee:corfin:v:45:y:2017:i:c:p:687-709 is not listed on IDEAS
    4. Drousia, Angeliki & Episcopos, Athanasios & Leledakis, George N., 2016. "Market Reaction to Stock Repurchases in Greece," MPRA Paper 85610, University Library of Munich, Germany, revised 01 Mar 2018.
    5. 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.
    6. Cissé, Abdoul Karim & Fontaine, Patrice, 2016. "Why do companies transfer the trading compartment of their common stocks," Research in International Business and Finance, Elsevier, vol. 36(C), pages 624-640.
    7. repec:eee:empfin:v:44:y:2017:i:c:p:66-90 is not listed on IDEAS
    8. João Granja & Christian Leuz, 2017. "The Death of a Regulator: Strict Supervision, Bank Lending and Business Activity," NBER Working Papers 24168, National Bureau of Economic Research, Inc.
    9. repec:eee:corfin:v:44:y:2017:i:c:p:73-98 is not listed on IDEAS
    10. Duro, Miguel & Heese, Jonas & Ormazabal, Gaizka, 2017. "Does the Public Disclosure of the SEC's Oversight Actions Matter?," CEPR Discussion Papers 12145, C.E.P.R. Discussion Papers.
    11. Burnett, Brian M. & Gordon, Elizabeth A. & Jorgensen, Bjorn N. & Linthicum, Cheryl L., 2015. "Earnings quality: evidence from Canadian firms’ choice between IFRS and U.S. GAAP," LSE Research Online Documents on Economics 62325, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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