Market in Financial Instruments Directive (MiFID), stock price informativeness and liquidity

Aghanya, Daniel; Agarwal, Vineet; Poshakwale, Sunil S.

doi:10.1016/j.jbankfin.2019.105730

Cited by 26 publications

(12 citation statements)

References 92 publications

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“…Their results are consistent with the ones obtained by Cumming et al (2011), who find that the liquidity increased post-MiFID I. Aghanya et al (2020) also point out that the improvements in market liquidity depends also on the quality of past financial regulation, finding significantly higher increases in the level of liquidity in the case of more weakly regulated countries. An event study, meant to capture the effect of this regulatory reform on the liquidity of the stock market might be able to better reveal the economic quality of MiFID II.…”

supporting

confidence: 90%

“…Stronger investor protection, which is at the core of MiFID regulation, motivates the investors to actively participate on the stock market. Lastly, stronger competition from other venues besides organized stock exchanges will also reduce the transaction costs and improve market liquidity (Aghanya et al 2020). However, the effect of regulation on stock market liquidity is not always straightforward.…”

Section: Introductionmentioning

confidence: 99%

“…This assertation is backed up by previous studies investigating the impact of the first directive, MiFID, on the stock market liquidity which found positive effects. Aghanya et al (2020) examined the impact of MiFID on the liquidity of the EU-28 stock markets using a DiD research design, finding a positive effect of the regulation on the liquidity of EU publicly traded stocks in the period 2006-2008. Their results are consistent with the ones obtained by Cumming et al (2011), who find that the liquidity increased post-MiFID I.…”

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confidence: 99%

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Impact of MiFID II on Romanian Stock Market Liquidity—Comparative Analysis with a Developed Stock Market

Miloş

Barna

et al. 2021

IJFS

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In light of previous literature that has investigated the effects of MiFID and MiFID II regulation on stock market liquidity, we investigate whether the introduction of MiFID II in Romania has had any effect on the stock market liquidity. Through our empirical analysis, we were able to estimate a meaningful reduction of liquidity in the Romanian stock market liquidity, in response to MiFID II, in line with the previous empirical literature. We find that the liquidity of the BET index constituents has decreased in the period following MiFID II. We find contradictory results in what concerns the German stock market, which could be explained by the different level of development of the stock markets and of the financial education of investors.

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confidence: 90%

Section: Introductionmentioning

confidence: 99%

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confidence: 99%

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Impact of MiFID II on Romanian Stock Market Liquidity—Comparative Analysis with a Developed Stock Market

Miloş

Barna

et al. 2021

IJFS

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“…While pre-trade transparency ensures the observation of the order flow, quotes and information about market participants (Boehmer et al 2005), post-trade transparency ensures the observation of execution quality, as well as execution prices (Dumitrescu 2010). Acording to Aghanya et al (2020), MiFID I led to an increase in the market transparency by enabling market participants to observe information in real time during the trading process, which helped them make more informed trade decisions. However, there are some studies that demonstrate the opposite effect, finding that the increase in market transparency can actually increase market volatility (Madhavan 1996;Madhavan et al 2005).…”

Section: Dalymentioning

confidence: 99%

Impact of MiFID II on the Market Volatility—Analysis on Some Developed and Emerging European Stock Markets

Miloş

2021

Laws

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The paper investigates whether the implementation of MiFID II, a packet of financial legislation applying broadly to European Union financial markets, has led to a change in the volatility of some European developed and emerging stock markets. We show that for the developed capital markets considered in the analysis, MiFID II did not lead to a decrease in the volatility of capital markets. On the contrary, for all analysis intervals considered (3 months, 6 months, 12 months, 18 months and 24 months), the impact on volatility is positive, with volatility increasing in the case of the FTSE 100, CAC40 and DAX stock indexes. There is a similar significant relationship for the Czech stock market, but only over the three-month interval. For the Polish and Romanian stock markets, which enforced MiFID II later, a negative impact of MiFID II on volatility could also be observed. In the Romanian market, MiFID II had a negative impact on volatility on the short-term horizon, while for the Polish market, the impact of MiFID II on volatility is noticeable on a longer term of 24 months.

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“…More importantly, many studies show the effectiveness of secondary market regulation, to a large extent, depends on a country's infrastructure and prior regulatory conditions. Not only are there differences between developed and emerging markets, but findings might vary from one emerging market to another (e.g., Fernandes and Ferreira, 2009;Budsaratragoon et al, 2012;Christensen, Hail, and Leuz, 2016;Chen, Huang, Kusnadi, and Wei, 2017;Aghanya, Agarwal, and Poshakwale, 2020). Different regulatory behavior, such as the introduction, implementation, and enforcement of the same regulation rules, might have different effects.…”

Section: Introductionmentioning

confidence: 99%

Essays on the Vietnam Stock Market

Nguyen¹

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<p>This thesis consists of three substantive studies about the Vietnam stock market. In particular, I study the asymmetric information, corporate governance (CG) practices, and foreign investment of publicly listed companies in Vietnam, presented in Chapters 2, 3, and 4, respectively. In Chapter 2, I investigate the effectiveness of a market surveillance system (MSS) on improving the market quality of the Vietnam stock market, as measured by liquidity and informed trading level. I find that market liquidity decreased after the introduction of the MSS, and that the effect is more pronounced for small firms. Although informed trading, on average, does not change significantly after the MSS, subsample analysis indicates a significant decrease in informed trading among large and liquid firms. In Chapter 3, I investigate the relationship between firms’ CG practices and informed trading. I find a negative relationship between the two variables. Firms with better CG practices have a lower level of informed stock trading. Moreover, a natural experiment on a shock of firms’ CG practices generated by the CG policies shows that the negative relationship between CG practices and informed trading is a causal one, in which a change in the former causes a change in the latter. In another analysis around the implementation of the MSS, I find that the implementation of the surveillance system affects the relationship between the two variables, and this effect is driven by large and liquid firms. In Chapter 4, I investigate whether foreign investors in the Vietnam stock market are informed about firms’ performance. Using the residuals of foreign investor ownership as a measure of the abnormal foreign investor holding, I find that the abnormal foreign investor holding is positively correlated with firm performance in the following one year. I also find a positive correlation between abnormal foreign investor holding and the stock returns in the next three quarters. These findings indicate that foreign investors are informed about the firms up to a one-year period.</p>

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Market in Financial Instruments Directive (MiFID), stock price informativeness and liquidity

Cited by 26 publications

References 92 publications

Impact of MiFID II on Romanian Stock Market Liquidity—Comparative Analysis with a Developed Stock Market

Impact of MiFID II on Romanian Stock Market Liquidity—Comparative Analysis with a Developed Stock Market

Impact of MiFID II on the Market Volatility—Analysis on Some Developed and Emerging European Stock Markets

Essays on the Vietnam Stock Market

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