Trading Costs of Non-U.S. Stocks on the NYSE: The Effect of Institutional Ownership, Analyst Following, and Market Regulation

Posted: 17 Aug 2004

See all articles by Christine X. Jiang

Christine X. Jiang

Fudan University

Jang-Chul Kim

Northern Kentucky University - Haile/US Bank College of Business

Abstract

We investigate the differences in market microstructure between U.S. and non-U.S. stocks cross-listed on the New York Stock Exchange (NYSE) using a sample of 316 pairs of matched stocks. We find that non-U.S. stocks have wider spreads and larger adverse-selection costs than U.S. stocks even after controlling for macro-level institutional differences. Regression analysis shows that spreads and adverse-selection costs are negatively correlated with institutional ownership and analyst followings. Thus, the higher spreads and adverse-selection costs on non-U.S. stocks can be partly explained by the lower institutional ownership and analyst following of non-U.S. stocks. In addition, we find that although the spreads and adverse-selection costs on non-U.S. stocks are significantly higher before the implementation of Regulation Fair Disclosure (FD), the differences become even greater after Regulation FD, suggesting that Regulation FD has improved the information environment for U.S. stocks.

Keywords: Trading costs, microstructure, institutional ownership

JEL Classification: G30, G34

Suggested Citation

Jiang, Christine X. and Kim, Jang-Chul, Trading Costs of Non-U.S. Stocks on the NYSE: The Effect of Institutional Ownership, Analyst Following, and Market Regulation. Available at SSRN: https://ssrn.com/abstract=577103

Christine X. Jiang

Fudan University ( email )

School of Management
Shanghai, 200433
China
862125011085 (Phone)

Jang-Chul Kim (Contact Author)

Northern Kentucky University - Haile/US Bank College of Business ( email )

Dept of Accounting, Finance, and Business Law
Highland Heights, KY 41099
United States
859-572-1486 (Phone)

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