IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v31y2019ics1544612318307402.html
   My bibliography  Save this article

Capital-market effects of securities regulation: Prior conditions, implementation, and enforcement revisited

Author

Listed:
  • Cumming, Douglas
  • Johan, Sofia

Abstract

While it is not clear from Christensen, Hail, and Leuz (2016), the market abuse rules they examine are the same as in Cumming, Johan, and Li (2011), with a difference in focus on the date: Christensen et al. (2016) pick the date the regulations were signed into law, while Cumming et al. (2011) pick date the date the regulations were implemented with organizational agreements and computerized surveillance. Both papers study and find the exact same effect: regulatory change improves market liquidity. We explain the relative merits of the different approaches in this paper, and identify misleading statements in prior work.

Suggested Citation

  • Cumming, Douglas & Johan, Sofia, 2019. "Capital-market effects of securities regulation: Prior conditions, implementation, and enforcement revisited," Finance Research Letters, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318307402
    DOI: 10.1016/j.frl.2018.12.013
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612318307402
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2018.12.013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2006. "What Works in Securities Laws?," Journal of Finance, American Finance Association, vol. 61(1), pages 1-32, February.
    2. Capelle-Blancard, Gunther & Havrylchyk, Olena, 2016. "The impact of the French securities transaction tax on market liquidity and volatility," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 166-178.
    3. Aitken, Michael & Cumming, Douglas & Zhan, Feng, 2015. "High frequency trading and end-of-day price dislocation," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 330-349.
    4. Sofia Johan, 2008. "Global Market Surveillance," American Law and Economics Review, American Law and Economics Association, vol. 10(2), pages 454-506.
    5. Hans B. Christensen & Luzi Hail & Christian Leuz, 2016. "Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement," The Review of Financial Studies, Society for Financial Studies, vol. 29(11), pages 2885-2924.
    6. Barra, Cristian & Destefanis, Sergio & Lubrano Lavadera, Giuseppe, 2016. "Risk and regulation: A difference-in-differences analysis for Italian local banks," Finance Research Letters, Elsevier, vol. 17(C), pages 25-32.
    7. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why are foreign firms listed in the U.S. worth more?," Journal of Financial Economics, Elsevier, vol. 71(2), pages 205-238, February.
    8. Douglas Cumming & Wenxuan Hou & Eliza Wu, 2018. "Exchange trading rules, governance, and trading location of cross-listed stocks," The European Journal of Finance, Taylor & Francis Journals, vol. 24(16), pages 1453-1484, November.
    9. Cumming, Douglas & Peter Groh, Alexander & Johan, Sofia, 2018. "Same rules, different enforcement: Market abuse in Europe," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 54(C), pages 130-151.
    10. Aitken, Michael & Cumming, Douglas & Zhan, Feng, 2015. "Exchange trading rules, surveillance and suspected insider trading," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 311-330.
    11. Luzi Hail & Christian Leuz, 2006. "International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?," Journal of Accounting Research, Wiley Blackwell, vol. 44(3), pages 485-531, June.
    12. To, Thomas Y. & Treepongkaruna, Sirimon & Wu, Eliza, 2018. "Are all insiders on the inside? Evidence from the initiation of CDS trading and short selling in the financial sector," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 54(C), pages 114-129.
    13. Park, Jong-Ho & Binh, Ki Beom & Eom, Kyong Shik, 2016. "The effect of listing switches from a growth market to a main board: An alternative perspective," Emerging Markets Review, Elsevier, vol. 29(C), pages 246-273.
    14. Cumming, Douglas & Johan, Sofia & Li, Dan, 2011. "Exchange trading rules and stock market liquidity," Journal of Financial Economics, Elsevier, vol. 99(3), pages 651-671, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Buckle, Mike & Chen, Jing & Guo, Qian & Li, Xiaoxi, 2023. "Does smile help detect the UK's price leadership change after MiFID?," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 756-769.
    2. Cowan, Arnold R. & Salotti, Valentina, 2020. "Anti-selective disclosure regulation and analyst forecast accuracy and usefulness," Journal of Corporate Finance, Elsevier, vol. 64(C).
    3. Douglas J. Cumming & Sofia Johan & Anshum Pant, 2019. "Regulation of the Crypto-Economy: Managing Risks, Challenges, and Regulatory Uncertainty," JRFM, MDPI, vol. 12(3), pages 1-14, July.
    4. Andriosopoulos, Dimitris & Panetsidou, Styliani, 2021. "A global analysis of Private Investments in Public Equity," Journal of Corporate Finance, Elsevier, vol. 69(C).
    5. Aitken, Michael & Cumming, Douglas & Zhan, Feng, 2023. "Algorithmic trading and market quality: International evidence of the impact of errors in colocation dates," Journal of Banking & Finance, Elsevier, vol. 151(C).
    6. Cumming, Douglas J. & Firth, Christopher & Gathergood, John & Stewart, Neil, 2021. "Covid, work-from-home, and securities misconduct," CFS Working Paper Series 666, Center for Financial Studies (CFS).
    7. Anolick, Nina & Batten, Jonathan A. & Kinateder, Harald & Wagner, Niklas, 2021. "Time for gift giving: Abnormal share repurchase returns and uncertainty," Journal of Corporate Finance, Elsevier, vol. 66(C).
    8. Knyazeva, Anzhela, 2019. "Financial innovation in microcap public offerings," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 283-305.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cumming, Douglas & Dannhauser, Robert & Johan, Sofia, 2015. "Financial market misconduct and agency conflicts: A synthesis and future directions," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 150-168.
    2. Anolick, Nina & Batten, Jonathan A. & Kinateder, Harald & Wagner, Niklas, 2021. "Time for gift giving: Abnormal share repurchase returns and uncertainty," Journal of Corporate Finance, Elsevier, vol. 66(C).
    3. Aghanya, Daniel & Agarwal, Vineet & Poshakwale, Sunil, 2020. "Market in Financial Instruments Directive (MiFID), stock price informativeness and liquidity," Journal of Banking & Finance, Elsevier, vol. 113(C).
    4. Cowan, Arnold R. & Salotti, Valentina, 2020. "Anti-selective disclosure regulation and analyst forecast accuracy and usefulness," Journal of Corporate Finance, Elsevier, vol. 64(C).
    5. Duong, Huu Nhan & Goyal, Abhinav & Kallinterakis, Vasileios & Veeraraghavan, Madhu, 2021. "Market manipulation rules and IPO underpricing," Journal of Corporate Finance, Elsevier, vol. 67(C).
    6. Douglas Cumming & Sofia Johan & Denis Schweizer, 2017. "Information systems, agency problems, and fraud," Information Systems Frontiers, Springer, vol. 19(3), pages 421-424, June.
    7. Paulo Pereira Silva & Isabel Vieira, 2022. "On the Effects of Capital Markets’ Regulation on Price Informativeness: an Assessment of EU Market Abuse Directive," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(2), pages 125-157, June.
    8. Mai, Nhat Chi, 2020. "Essays on the Vietnam Stock Market," OSF Preprints 3uaqt, Center for Open Science.
    9. James P. Naughton & Rafael Rogo & Jayanthi Sunder & Ray Zhang, 2018. "SEC monitoring of foreign firms’ disclosures in the presence of foreign regulators," Review of Accounting Studies, Springer, vol. 23(4), pages 1355-1388, December.
    10. Dissanaike, Gishan & Drobetz, Wolfgang & Momtaz, Paul P. & Rocholl, Jörg, 2021. "The Economics of Law Enforcement: Quasi-Experimental Evidence from Corporate Takeover Law," Journal of Corporate Finance, Elsevier, vol. 67(C).
    11. Chen, Rong & Geng, Heng (Griffin) & Lin, Hai & Nguyen, Phuong Thi Ly, 2021. "Liquidity, informed trading, and a market surveillance system: Evidence from the Vietnamese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    12. Aitken, Michael & Cumming, Douglas & Zhan, Feng, 2015. "Exchange trading rules, surveillance and suspected insider trading," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 311-330.
    13. Cline, Brandon N. & Posylnaya, Valeriya V., 2019. "Illegal insider trading: Commission and SEC detection," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 247-269.
    14. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    15. Chiu, Junmao & Chung, Huimin, 2019. "Legal institutions and fragile financial markets," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 277-298.
    16. Cumming, Douglas & Ji, Shan & Peter, Rejo & Tarsalewska, Monika, 2020. "Market manipulation and innovation," Journal of Banking & Finance, Elsevier, vol. 120(C).
    17. Douglas Cumming & Igor Filatotchev & April Knill & David Mitchell Reeb & Lemma Senbet, 2017. "Law, finance, and the international mobility of corporate governance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(2), pages 123-147, February.
    18. Sarkissian, Sergei & Schill, Michael J., 2012. "The nature of the foreign listing premium: A cross-country examination," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2494-2511.
    19. Cumming, Douglas & Knill, April & Richardson, Nela, 2015. "Firm size and the impact of securities regulation," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 417-442.
    20. Christian Leuz & Karl V. Lins & Francis E. Warnock, 2010. "Do Foreigners Invest Less in Poorly Governed Firms?," The Review of Financial Studies, Society for Financial Studies, vol. 23(3), pages 3245-3285, March.

    More about this item

    Keywords

    Securities regulation; Market manipulation; Liquidity; Insider trading; Broker-agency conflict; Law and finance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Capital-market effects of securities regulation: Prior conditions, implementation, and enforcement revisited (Finance Research Letters 2019) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318307402. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.