Disclosure requirements and stock exchange listing choice in an international context

Citation:

Huddart, Steven, John S Hughes, and Markus Brunnermeier. “Disclosure requirements and stock exchange listing choice in an international context”. Journal of Accounting and Economics 26 (1999): , 26, 237 - 269. Print.

Number:

1-3

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 also are modeled.

Notes:

Competition among exchanges leads to a "race to the top" in disclosure standards.

Last updated on 07/16/2014