Disclosure-based regulation and municipal security trade prices

Komla D. Dzigbede

Journal of Financial Economic Policy, 2024, vol. 16, issue 2, 137-161

Abstract: Purpose - This paper aims to measure the trade price impact of a recent regulatory disclosure intervention in municipal securities secondary markets, which required broker-dealers to disclose securities trading information on a near-real-time and continuing basis. Design/methodology/approach - The author analyzes trade price outcomes in the preintervention and postintervention regimes using a suite of time series estimations that give heteroskedasticity-robust standard errors (Prais–Winsten and Cochrain–Orcutt), accommodate higher-order lag structure in the error term (autoregressive integrated moving average) and account for volatility clustering in the time series (generalized autoregressive conditional heteroskedasticity). Findings - Results show that regulatory disclosure intervention significantly improved trade price efficiency in municipal securities secondary markets as daily trade price differential and volatility both declined market-wide after the disclosure intervention. Research limitations/implications - The sample consists of trades in State of California general obligation bonds; therefore, empirical findings may not be generalizable to other states, local governments and different types of bonds. Practical implications - The findings highlight voluntary information disclosure as a practical and effective mechanism in disclosure regulation of municipal securities secondary markets. Originality/value - Only a small body of work exists that examines information disclosure regulation in municipal securities secondary markets; therefore, this paper expands knowledge on the topic and should provide renewed impetus for regulatory efforts aimed at improving the efficiency of municipal capital markets.

Keywords: Municipal securities; Secondary market; Securities pricing; Regulatory disclosure; Financial markets; Economics of regulation; Market efficiency; Debt management; Regulatory change; Market structure and pricing (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:jfep-09-2019-0186

DOI: 10.1108/JFEP-09-2019-0186

Access Statistics for this article

Journal of Financial Economic Policy is currently edited by Prof Franklin Mixon

More articles in Journal of Financial Economic Policy from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().