The Capital Market Effects of Centralizing Regulated Financial Information

50 Pages Posted: 30 Sep 2020 Last revised: 13 Apr 2021

See all articles by Gurpal Sran

Gurpal Sran

University of Chicago

Marcel Tuijn

Southern Methodist University (SMU); Erasmus University Rotterdam (EUR)

Lauren Vollon

University of Chicago Booth School of Business

Date Written: August 1, 2020

Abstract

We study the capital market effects of information centralization by exploiting the staggered implementation of digital platforms for the centralized storage and access of regulated financial information (Officially Appointed Mechanisms, or OAMs) in the European Union. We find that the implementation of OAMs results in significant improvements in capital market liquidity. Improvements in liquidity are especially significant for small firms and firms with low levels of institutional ownership, consistent with information centralization improving liquidity by lowering information processing costs. Improvements in liquidity are also larger when peer learning opportunities are present, consistent with indirect effects of information centralization. Further, we provide descriptive evidence that the capital market effects of centralization are larger when an OAM is managed by a national regulator rather than a third party operator.

Keywords: Information centralization, information asymmetry, processing costs, liquidity, securities regulation

JEL Classification: G14, G15, G18, M41, M48

Suggested Citation

Sran, Gurpal and Tuijn, Marcel and Vollon, Lauren, The Capital Market Effects of Centralizing Regulated Financial Information (August 1, 2020). Available at SSRN: https://ssrn.com/abstract=3673618 or http://dx.doi.org/10.2139/ssrn.3673618

Gurpal Sran (Contact Author)

University of Chicago

1101 East 58th Street
Chicago, IL 60637
United States

Marcel Tuijn

Southern Methodist University (SMU)

6212 Bishop Blvd.
Dallas, TX 75275
United States

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Lauren Vollon

University of Chicago Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
6192789642 (Phone)
6192789642 (Fax)

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