Disclosure requirements and stock exchange listing choice in an international context

Steven Huddart, John Hughes and Markus Brunnermeier

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We use a rational expectations model to examine how public disclosure requirements affect listing decisions by rent-seeking corporate insiders, and allocation decisions by liquidity traders seeking to minimize trading costs. We find that exchanges competing for trading volume engage in a "race for the top" whereunder disclosure requirements increase and trading costs fall. This result is robust to diversification incentives of risk-averse liquidity traders, institutional impediments that restrict the flow of liquidity, and listing costs. Under certain conditions, unrestricted liquidity flows to low disclosure exchanges. The consequences of cross-listing and harmonization of disclosure standards are modeled.

Keywords: insider trading; exchange listing requirements; liquidity; securities regulation (search for similar items in EconPapers)
JEL-codes: G15 K22 M41 (search for similar items in EconPapers)
Pages: 40 pages
Date: 1998-01-01
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http://eprints.lse.ac.uk/119158/ Open access version. (application/pdf)

Related works:
Journal Article: Disclosure requirements and stock exchange listing choice in an international context (1999)
Working Paper: Disclosure Requirements and Stock Exchange Listing Choice in an International Context (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:119158

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