The Twilight Zone: OTC Regulatory Regimes and Market Quality

• 成果类型: Article
• 署名作者: Brueggemann, Ulf; Kaul, Aditya; Leuz, Christian; Werner, Ingrid M.
• 署名单位: Humboldt University of Berlin; University of Alberta; University of Chicago; National Bureau of Economic Research; University System of Ohio; Ohio State University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhx102
• 发表日期: 2018
• 页码: 898
• 关键词: FIRMS GO DARK; economic consequences; stock-market; liquidity; prices; LAW; INFORMATION; returns; opinion; crashes

摘要

Studying a comprehensive sample of stocks from the U.S. OTC market, we show that this market is a large and diverse trading environment with a rich set of regulatory and disclosure regimes, comprising venue rules and state laws beyond SEC regulation. We exploit this institutional richness to show that OTC firms subject to stricter regulatory regimes and disclosure requirements have higher market quality (higher liquidity and lower crash risk). Our analysis points to an important trade-off in regulating the OTC market and protecting investors: lowering regulatory requirements reduces the compliance burden for smaller firms, but it also reduces market quality.