Disclosure Requirements and Stock Exchange Listing Choice in an International Context

John S. Hughes, Steven Huddart and Markus Brunnermeier

FMG Discussion Papers from Financial Markets Group

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 a 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 modelled.

Date: 1998-01
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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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