Regulatory Cooperation and Foreign Portfolio Investment

30 Pages Posted: 8 Aug 2018 Last revised: 6 Oct 2019

See all articles by Mark H. Lang

Mark H. Lang

University of North Carolina at Chapel Hill

Mark G. Maffett

University of Chicago - Booth School of Business

James D. Omartian

University of Michigan - Ross School of Business

Roger Silvers

University of Utah

Date Written: September 30, 2019

Abstract

We investigate the effect of cross-border regulatory cooperation in the enforcement of securities laws on global-mutual-fund portfolio allocations. Our research design exploits a shock to the Securities and Exchange Commission's oversight of foreign firms cross-listed on a US stock exchange around the signing of the Multilateral Memorandum of Understanding (MMoU), a non-binding, information-sharing arrangement between global securities regulators. In signatory countries, foreign investment in US-cross-listed firms increases by $110 billion relative to non-cross-listed firms. The strongest effects are for investors facing greater information asymmetries, those from countries closely linked to the US, and non-US foreign investors, suggesting significant spillover effects from international regulatory cooperation.

Keywords: Securities regulation, Foreign portfolio investment, Regulatory bonding

JEL Classification: G11, G15, G18

Suggested Citation

Lang, Mark H. and Maffett, Mark G. and Omartian, James D. and Silvers, Roger, Regulatory Cooperation and Foreign Portfolio Investment (September 30, 2019). Journal of Financial Economics (JFE), Forthcoming, Ross School of Business Paper No. 1385, Kenan Institute of Private Enterprise Research Paper No. 18-38, Available at SSRN: https://ssrn.com/abstract=3217447 or http://dx.doi.org/10.2139/ssrn.3217447

Mark H. Lang

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

Mark G. Maffett

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

James D. Omartian (Contact Author)

University of Michigan - Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States

Roger Silvers

University of Utah ( email )

1655 E Campus Dr
SLC, UT 01003
United States

HOME PAGE: http://www.rogersilvers.com/

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