Capital Market Governance: How Do Security Laws Affect Market Performance?
No hay miniatura disponible
Fecha
Título de la revista
ISSN de la revista
Título del volumen
Editor
Resumen
Descripción
This paper examines the link between capital market governance (CMG) and several key
measures of market performance. Using detailed data from individual stock exchanges,
we develop a composite CMG index that captures three dimensions of security laws: the
degree of earnings opacity, the enforcement of insider laws, and the effect of removing
short-selling restrictions. We find that improvements in the CMG index are associated
with decreases in the cost-of-equity capital (both implied and realized), increases in
market liquidity (trading volume, market depth, and U.S. foreign investments), and
increases in market pricing efficiency (reduced price synchronicity and IPO
underpricing). The results are quite consistent across individual components of CMG
and over alternative market performance measures.