Firm Size, Institutional Quality and the Impact of Securities Regulation
43 Pages Posted: 17 Mar 2010 Last revised: 21 Nov 2014
Date Written: January 24, 2011
We examine the influence of both public and private enforcement of securities regulation on securities issuance across firm size and institutional quality. We conjecture that in G10 countries with strong institutional environments, private enforcement benefits large firms more than small firms, while public enforcement facilitates small firm security issuance. In weak institutional environments in non-G10 countries where information asymmetries between firms and investors are more pronounced, mandated private enforcement disclosure requirements are relatively more beneficial to opaque smaller firms. Stronger public enforcement gives rise to larger firms raising capital internationally both among G10 and non-G10 countries. A newly assembled dataset of 42,337 firms across 46 countries spanning the years 1996-2007 is consistent with these predictions.
Keywords: Securities regulation, law and finance, access to finance, capital issuance
JEL Classification: K22, G38
Suggested Citation: Suggested Citation