Regulatory cooperation and foreign portfolio investment

Mark Lang, Mark Maffett, James D. Omartian and Roger Silvers

Journal of Financial Economics, 2020, vol. 138, issue 1, 138-158

Abstract: We investigate the effect of cross-border regulatory cooperation in the enforcement of securities laws on global-mutual-fund portfolio allocations. Our research design exploits a shock to the Securities and Exchange Commission’s oversight of foreign firms cross-listed on a US stock exchange around the signing of the Multilateral Memorandum of Understanding (MMoU), a non-binding, information-sharing arrangement between global securities regulators. In signatory countries, foreign investment in US-cross-listed firms increases by $110 billion relative to non-cross-listed firms. The strongest effects are for investors facing greater information asymmetries, those from countries closely linked to the US, and non-US foreign investors, suggesting significant spillover effects from international regulatory cooperation.

Keywords: Securities regulation; Foreign portfolio investment; Regulatory bonding (search for similar items in EconPapers)
JEL-codes: G11 G15 G18 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:138:y:2020:i:1:p:138-158

DOI: 10.1016/j.jfineco.2020.04.016

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