Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement
Hans Bonde Christensen
University of Chicago - Booth School of Business
University of Pennsylvania - The Wharton School
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
March 31, 2016
ECGI - Finance Working Paper No. 407/2014
Chicago Booth Research Paper No. 12-04
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.
Number of Pages in PDF File: 79
Keywords: Capital market regulation, Enforcement, Disclosure, Law and finance, European Union, Liquidity
JEL Classification: F30, G15, G18, G30, K22, M41
Date posted: January 23, 2011 ; Last revised: April 6, 2016
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