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

80 Pages Posted: 31 Jan 2011

See all articles by Hans Bonde Christensen

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

Multiple version iconThere are 3 versions of this paper

Date Written: January 2011

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

Christensen, Hans Bonde and Hail, Luzi and Leuz, Christian, Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement (January 2011). NBER Working Paper No. w16737. Available at SSRN: https://ssrn.com/abstract=1749896

Hans Bonde Christensen (Contact Author)

University of Chicago - Booth School of Business ( email )

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Luzi Hail

University of Pennsylvania - The Wharton School ( email )

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Christian Leuz

University of Chicago - Booth School of Business ( email )

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European Corporate Governance Institute (ECGI)

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Center for Financial Studies (CFS) ( email )

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University of Pennsylvania - Wharton Financial Institutions Center

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