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Capital Market Governance: How Do Security Laws Affect Market Performance?

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dc.contributor.authorDaouk, Hazem
dc.contributor.authorLee, Charles M.C.
dc.contributor.authorNg, David T.C.
dc.date.accessioned2018-08-21T17:10:34Z
dc.date.available2018-08-21T17:10:34Z
dc.date.issued2005-04
dc.descriptionWP 2005-08 April 2005
dc.descriptionJEL Classification Codes: G15; G30
dc.description.abstractThis 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.
dc.identifier.urihttps://hdl.handle.net/1813/57990
dc.language.isoen_US
dc.publisherCharles H. Dyson School of Applied Economics and Management, Cornell University
dc.subjectcapital market governance
dc.subjectinsider trading
dc.subjectearnings opacity
dc.subjectshort-selling constraints
dc.subjectmarket performance
dc.titleCapital Market Governance: How Do Security Laws Affect Market Performance?
dc.typearticle
dcterms.licensehttp://hdl.handle.net/1813/57595

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