Anatomy of a regulatory race to the top: Changes in delisting rules at Korea's two stock exchanges, 1999–2002 |
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| Authors: | Kathryn L Dewenter Chang-Soo Kim Walter Novaes |
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| Institution: | 1. University of Washington, United States;2. Yonsei University, Republic of Korea;3. Pontifical Catholic University of Rio de Janeiro, Brazil;1. ENVIRON International Corporation, 773 San Marin Drive, Suite 2115, Novato, CA 94998, USA;2. Electric Power Research Institute, 3420 Hillview Avenue, Palo Alto, CA 94304, USA;3. School of Civil and Environmental Engineering, Georgia Institute of Technology, 790 Atlantic Drive, Atlanta, GA 30332, USA;1. University of Tunis El Manar, Faculty of Sciences of Tunis, Lipah, Tunis, Tunisia;2. Université de Lyon, Saint-Étienne, F-42023, France;3. CNRS, UMR 5516, Laboratoire Hubert Curien, Saint-Étienne, F-42023, France;4. Université de Saint-Étienne, Jean-Monnet, Saint-Étienne, F-42023, France;5. Institut Mines - Telecom, Telecom SudParis, UMR CNRS Samavor, 91011 Evry Cedex, France;1. Laboratory of Heterocyclic Chemistry, Natural Products and Reactivity (LR11SE39), Team: Medicinal Chemistry and Natural Products, Faculty of Science of Monastir, University of Monastir, Avenue of Environment, 5019 Monastir, Tunisia;2. University of Toulouse, Faculty of Pharmacy of Toulouse, Laboratory of Molecular Interactions and Chemical and Photochemical Reactivities, UMR CNRS 5623, University Paul-Sabatier, 118 Narbonne Road, F-31062 Toulouse, France;1. ISG International Business School (GrIIsG), Paris, France;2. CNRS (EUROFIDAI) and Léonard de Vinci Pôle Universitaire, Finance Lab, Paris La Défense, France |
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| Abstract: | One dimension of competition among stock exchanges is the quality of products they have to offer. In order to attract listings and trading volume, exchanges can affect the quality of their listed firms by altering their standards for firm disclosure and governance. We identify a competition with respect to delisting standards between Korea's two stock exchanges and show that it complies with the three components of a regulatory race to the top: external trigger, mobility among diverse regimes and meaningful changes that converge to similar rules. The race between the two Korean exchanges ended with stricter rules and better protected minority shareholders. The race also ended, however, with neither exchange gaining market share with respect to trading volume or new listings. Korea's experience, therefore, suggests a reason why these races are rare. In the absence of an external trigger, exchanges will be reluctant to enter a race if they think it will result in rule convergence and no winner. |
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