Fragmented Securities Regulation and Information-Processing Costs

63 Pages Posted: 10 Jul 2019 Last revised: 24 Nov 2021

See all articles by Sehwa Kim

Sehwa Kim

Columbia University - Columbia Business School

Seil Kim

Baruch College, City University of New York

Date Written: November 24, 2021

Abstract

Using a unique setting where stand-alone banks submit filings to bank regulators instead of to the SEC, we examine whether the disclosure system maintained by bank regulators (FDICconnect) generates higher information-processing costs and thus delays market reaction to insider-trading filings. We find that the market reaction to insider-trading filings on FDICconnect is less timely than on those on SEC EDGAR. We also find that only large investors trade more on insider-trading filings on FDICconnect than on those on SEC EDGAR, thus extracting benefits from the delayed market reaction to insider-trading filings on FDICconnect. In contrast to prior studies focusing on the enforcement channel, we identify an information channel through which regulatory fragmentation undermines market efficiency and distorts the level-playing field.

Keywords: Banks; regulation; FDICconnect; SEC EDGAR; insider trading; information processing costs

JEL Classification: G14, G21, G28, M41, M48

Suggested Citation

Kim, Sehwa and Kim, Seil, Fragmented Securities Regulation and Information-Processing Costs (May 10, 2021). Baruch College Zicklin School of Business Research Paper No. 2019-07-01, Available at SSRN: https://ssrn.com/abstract=3416204 or http://dx.doi.org/10.2139/ssrn.3416204

Sehwa Kim (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Seil Kim

Baruch College, City University of New York ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States

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