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Disclosure Requirements and Stock Exchange Listing Choice in an International Context

Author

Listed:
  • John S. Hughes
  • Steven Huddart
  • Markus K Brunnermeier
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.

Suggested Citation

  • John S. Hughes & Steven Huddart & Markus K Brunnermeier, 1998. "Disclosure Requirements and Stock Exchange Listing Choice in an International Context," FMG Discussion Papers dp282, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp282
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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