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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 237-269 |
| Number of pages | 33 |
| Journal | Journal of Accounting and Economics |
| Volume | 26 |
| Issue number | 1-3 |
| DOIs | |
| State | Published - Jan 1999 |
| Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Accounting
- Finance
- Economics and Econometrics
Keywords
- Exchange listing requirements
- G15
- Insider trading
- K22
- Liquidity
- M41
- Securities regulation