Do investors value high levels of regulation?
It is often taken as axiomatic that investors prefer high levels of regulation. Yet companies have increasingly chosen to list on stock exchanges with lower regulatory requirements. In this paper we analyse whether investors value high regulatory standards for quoted companies. We use the unusual...
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| Format: | Working paper |
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University of Oxford
2008
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| _version_ | 1797067863282941952 |
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| author | Jenkinson, T Ramadorai, T |
| author_facet | Jenkinson, T Ramadorai, T |
| author_sort | Jenkinson, T |
| collection | OXFORD |
| description | It is often taken as axiomatic that investors prefer high levels of regulation. Yet companies have increasingly chosen to list on stock exchanges with lower regulatory requirements. In this paper we analyse whether investors value high regulatory standards for quoted companies. We use the unusual regulatory environment observed in London - two alternative regulatory regimes with the same trading technology - to analyse these issues. We focus on 218 firms that chose to switch their trading 'down' from the highly regulated Main market to the lightly regulated AIM market, and 56 firms that moved 'up' to the Main market. Switching firms on average experience down (up) announcement returns of approximately -4% (+5%). However these initial reactions are reversed over several months after the actual switch. Our results suggest that particular investor clienteles exist for the two markets, and that other investors who place little value on the higher regulatory standards become the relevant marginal investors when companies switch to AIM. |
| first_indexed | 2024-03-06T22:02:28Z |
| format | Working paper |
| id | oxford-uuid:4f0f810c-676e-43a7-ae6a-be37a33e70c7 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T22:02:28Z |
| publishDate | 2008 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:4f0f810c-676e-43a7-ae6a-be37a33e70c72022-03-26T16:04:52ZDo investors value high levels of regulation?Working paperhttp://purl.org/coar/resource_type/c_8042uuid:4f0f810c-676e-43a7-ae6a-be37a33e70c7Bulk import via SwordSymplectic ElementsUniversity of Oxford2008Jenkinson, TRamadorai, TIt is often taken as axiomatic that investors prefer high levels of regulation. Yet companies have increasingly chosen to list on stock exchanges with lower regulatory requirements. In this paper we analyse whether investors value high regulatory standards for quoted companies. We use the unusual regulatory environment observed in London - two alternative regulatory regimes with the same trading technology - to analyse these issues. We focus on 218 firms that chose to switch their trading 'down' from the highly regulated Main market to the lightly regulated AIM market, and 56 firms that moved 'up' to the Main market. Switching firms on average experience down (up) announcement returns of approximately -4% (+5%). However these initial reactions are reversed over several months after the actual switch. Our results suggest that particular investor clienteles exist for the two markets, and that other investors who place little value on the higher regulatory standards become the relevant marginal investors when companies switch to AIM. |
| spellingShingle | Jenkinson, T Ramadorai, T Do investors value high levels of regulation? |
| title | Do investors value high levels of regulation? |
| title_full | Do investors value high levels of regulation? |
| title_fullStr | Do investors value high levels of regulation? |
| title_full_unstemmed | Do investors value high levels of regulation? |
| title_short | Do investors value high levels of regulation? |
| title_sort | do investors value high levels of regulation |
| work_keys_str_mv | AT jenkinsont doinvestorsvaluehighlevelsofregulation AT ramadorait doinvestorsvaluehighlevelsofregulation |