Abstract

http://ssrn.com/abstract=1745105
 
 

Citations (16)



 


 



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


Hans Bonde Christensen


University of Chicago - Booth School of Business

Luzi Hail


University of Pennsylvania - The Wharton School

Christian Leuz


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

July 31, 2015

ECGI - Finance Working Paper No. 407/2014
Chicago Booth Research Paper No. 12-04

Abstract:     
This paper examines the capital-market effects of changes in securities regulation. We analyze two key directives in the European Union (EU) that tightened market abuse and transparency regulation. All EU member states were required to adopt these directives, but for plausibly exogenous reasons did so at different times. We exploit this staggered introduction to estimate causal effects of tighter securities regulation for the population of European firms, and find significant increases in market liquidity. Examining cross-sectional variation, we find larger treatment effects in countries that implement and enforce the directives more strictly. They are also stronger in countries with traditionally stricter securities regulation and a better track record of implementing regulation. The cross-sectional results indicate that the same forces that limited the effectiveness of regulation in the past are at play when new rules are introduced, leading to hysteresis in regulatory outcomes. The findings suggest that harmonizing regulation in countries with different prior conditions can make countries diverge more rather than less.

Number of Pages in PDF File: 70

Keywords: Capital market regulation, Enforcement, Disclosure, Law and finance, European Union, Liquidity

JEL Classification: F30, G15, G18, G30, K22, M41


Open PDF in Browser Download This Paper

Date posted: January 23, 2011 ; Last revised: August 7, 2015

Suggested Citation

Christensen, Hans Bonde and Hail, Luzi and Leuz, Christian, Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement (July 31, 2015). Chicago Booth Research Paper No. 12-04. Available at SSRN: http://ssrn.com/abstract=1745105 or http://dx.doi.org/10.2139/ssrn.1745105

Contact Information

Hans Bonde Christensen
University of Chicago - Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

Luzi Hail
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-8205 (Phone)
215-573-2054 (Fax)
Christian Leuz (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-1996 (Phone)
HOME PAGE: http://chicagobooth.edu/fac/christian.leuz
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://www.nber.org
European Corporate Governance Institute (ECGI)
Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Center for Financial Studies (CFS) ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
University of Pennsylvania - Wharton Financial Institutions Center
3641 Locust Walk
Philadelphia, PA 19104-6218
United States
CESifo Research Network
Poschinger Str. 5
Munich, DE-81679
Germany
Feedback to SSRN


Paper statistics
Abstract Views: 12,883
Downloads: 2,411
Download Rank: 2,846
Citations:  16

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.375 seconds