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Disclosure
Requirements and Stock Exchange Listing Choice in an International
Context
| Co-author: |
Steven Huddart (Duke University),
John Hughes (Duke University) |
| Reference: |
Journal of
Accounting and Economics, 1999, 26(1-3), 237-269. |
| 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 cost 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. |
| Keywords: |
Competition among Exchanges, Insider trading,
Exchange listing requirements, Liquidity, Securities regulation |
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