The Economic Consequences of Increased Disclosure: Evidence from International Cross-listings

Bailey, Warren; Karolyi, G. Andrew; Salva, Carolina

doi:10.2139/ssrn.304560

Cited by 118 publications

(19 citation statements)

References 120 publications

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“…This approach, though less common in the literature than parametric t statistic tests, has been documented to be preferable to other test methods with respect to event clustering, increases in variance on the event day, and Type I errors (or the incorrect rejection of null hypotheses). [23], [24], [25], [26] To compare the proportion of CAR signs at different times during the event window, we also used the binomial test.…”

Section: Methodsmentioning

confidence: 99%

Stock Market Returns and Clinical Trial Results of Investigational Compounds: An Event Study Analysis of Large Biopharmaceutical Companies

Hwang

2013

PLoS ONE

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BackgroundFor biopharmaceutical companies, investments in research and development are risky, and the results from clinical trials are key inflection points in the process. Few studies have explored how and to what extent the public equity market values clinical trial results.MethodsOur study dataset matched announcements of clinical trial results for investigational compounds from January 2011 to May 2013 with daily stock market returns of large United States-listed pharmaceutical and biotechnology companies. Event study methodology was used to examine the relationship between clinical research events and changes in stock returns.ResultsWe identified public announcements for clinical trials of 24 investigational compounds, including 16 (67%) positive and 8 (33%) negative events. The majority of announcements were for Phase 3 clinical trials (N = 13, 54%), and for oncologic (N = 7, 29%) and neurologic (N = 6, 24%) indications. The median cumulative abnormal returns on the day of the announcement were 0.8% (95% confidence interval [CI]: –2.3, 13.4%; P = 0.02) for positive events and –2.0% (95% CI: –9.1, 0.7%; P = 0.04) for negative events, with statistically significant differences from zero. In the day immediately following the announcement, firms with positive events were associated with stock price corrections, with median cumulative abnormal returns falling to 0.4% (95% CI: –3.8, 12.3%; P = 0.33). For firms with negative announcements, the median cumulative abnormal returns were –1.7% (95% CI: –9.5, 1.0%; P = 0.03), and remained significantly negative over the two day event window. The magnitude of abnormal returns did not differ statistically by indication, by trial phase, or between biotechnology and pharmaceutical firms.ConclusionsThe release of clinical trial results is an economically significant event and has meaningful effects on market value for large biopharmaceutical companies. Stock return underperformance due to negative events is greater in magnitude and persists longer than abnormal returns due to positive events, suggesting asymmetric market reactions.

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Section: Methodsmentioning

confidence: 99%

Stock Market Returns and Clinical Trial Results of Investigational Compounds: An Event Study Analysis of Large Biopharmaceutical Companies

Hwang

2013

PLoS ONE

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“…; Bailey et al. ; Hail and Leuz ; Roosenboom and Dijk ). The long‐run performance of cross‐listings is also examined by several studies (e.g.…”

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confidence: 99%

Long‐run Effects of Minimum Trading Unit Reductions on Stock Prices

Isaka

2014

Int Rev Finance

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We examine empirically the long‐run effects of reductions in minimum trading units (MTU) on stock prices in Japan from October 2001 to May 2008. When firms reduce their MTU, the number of individual shareholders tends to increase significantly for several years. We estimate buy‐and‐hold abnormal returns and find that positive stock returns are observed not only for the period between the announcement day and the actual date of MTU decreases, but also for a period of several years following MTU reductions. In addition, we measure stock price reactions to the release of public information before and after MTU reductions and find that stock prices react less to the release of positive information and more to the release of negative information after the MTU reductions. These findings, together with evidence of the change in the short and long positions of investors after the MTU reductions, indicate that individual investors face short‐sales constraints.

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“…Important benefits of a U.S. OTC listing include increased analyst coverage (Doidge et al []), lower cost of capital (Hail and Leuz []), and an enhanced information environment (Bailey, Karolyi, and Salva [], Fernandes and Ferreira []). Important costs include reduced private benefits of control (Doidge et al []) and direct compliance costs .…”

Section: Institutional Setting and Hypothesis Developmentmentioning

confidence: 99%

Uninvited U.S. Investors? Economic Consequences of Involuntary Cross‐Listings

Iliev

Miller

Roth

2014

J of Accounting Research

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We study the economic consequences of a recent Securities and Exchange Commission securities regulation change that grants foreign firms trading on the U.S. over‐the‐counter (OTC) market an automatic exemption from the reporting requirements of the 1934 Securities Act. We document that the number of voluntary (sponsored) OTC cross‐listings did not increase following the regulation change, suggesting that it did not achieve its intended purpose of increasing voluntary OTC cross‐listings through a reduction in compliance costs. We do find that the design of the regulation allowed financial intermediaries to create an unprecedented number of involuntary (unsponsored) OTC ADRs: 1,700 unsponsored ADR programs for 920 firms were created for companies that had previously chosen not to cross‐list in the United States. Our difference‐in‐differences analysis based on a matched sample approach documents that foreign firms forced into the U.S. capital markets experience a significant decrease in firm value, and we further show that the decrease in firm value is related to an increase in U.S. litigation risk. We also find that depositary banks’ propensity to involuntarily cross‐list firms is positively related to banks’ expected fee revenue, and that banks chose firms that incur high costs when involuntarily cross‐listed. Our results provide evidence that securities regulation can be exploited for private gain and result in costly unintended consequences.

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The Economic Consequences of Increased Disclosure: Evidence from International Cross-listings

Cited by 118 publications

References 120 publications

Stock Market Returns and Clinical Trial Results of Investigational Compounds: An Event Study Analysis of Large Biopharmaceutical Companies

Stock Market Returns and Clinical Trial Results of Investigational Compounds: An Event Study Analysis of Large Biopharmaceutical Companies

Long‐run Effects of Minimum Trading Unit Reductions on Stock Prices

Uninvited U.S. Investors? Economic Consequences of Involuntary Cross‐Listings

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