Does One Size Fit All? The Consequences of Switching Markets with Different Regulatory Standards

52 Pages Posted: 21 Mar 2007 Last revised: 16 Mar 2009

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2008

Abstract

As the regulation of public companies has progressively tightened in recent years, many companies have chosen to switch to stock exchanges with lower regulatory requirements. We analyse the consequences of switching for smaller quoted companies, using the unusual regulatory environment in London, which has two markets with different regulatory regimes but the same trading technology. Firms that switch to lighter regulation experience negative announcement returns of approximately 5%. However the initial price reactions are reversed after the actual switch - these firms experience a longer-term upward drift in stock returns, which we relate to improved operating performance.

Keywords: stock markets, listing, regulation, switching

JEL Classification: G14, G30

Suggested Citation

Jenkinson, Tim and Ramadorai, Tarun, Does One Size Fit All? The Consequences of Switching Markets with Different Regulatory Standards (July 2008). AFA 2008 New Orleans Meetings Paper; ECGI - Finance Working Paper No. 212/2008. Available at SSRN: https://ssrn.com/abstract=971699 or http://dx.doi.org/10.2139/ssrn.971699

Tim Jenkinson (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Tarun Ramadorai

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

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

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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