Exchange Trading Rules, Governance, and Trading Location of Cross-Listed Stocks
Douglas J. Cumming
York University - Schulich School of Business
UNSW Business School; Financial Research Network (FIRN)
University of Technology, Sydney - UTS Business School; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)
March 17, 2011
24th Australasian Finance and Banking Conference 2011 Paper
2012 Financial Markets & Corporate Governance Conference
This paper shows stock exchange trading rules are of central importance for the trading location of cross-listed stocks. We consider various measures of sovereign governance and shareholder rights across countries to assess the complementary effects of other legal and institutional drivers of trading activity. The data indicate that the proportion of trades that occurs on an exchange increases at a decreasing rate with the strength of stock exchange trading rules. The effectiveness of stock exchange rules increases with the strength of regulatory institutions in the country hosting the stock exchange. Furthermore, corroborating with our full sample findings, difference-in-difference tests indicate the promulgation of MIFID, which strengthened trading rules within the European Union (EU), has increased the amount of trade in the EU.
Number of Pages in PDF File: 48
Keywords: cross-listing, governance, trading rules, law and finance
JEL Classification: G15, G38, K22
Date posted: March 23, 2011 ; Last revised: March 8, 2013
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