Institution: York University, Canada
Supervisor: Douglas Cumming

Research Questions:

• Do market integrity rules have any impact on market liquidity in the context of stock exchanges? Specifically, we examine if detailed exchanges trading rules, compared to principle-based rules, facilitate trading activity and improve market liquidity.
• Do incidences of insider trading exist in Canadian acquirer’s stock before takeover announcement? We further examine whether there is difference in price run-up and how the run-up is related to firm and deal characteristics.
• What is the relationship between business starts and deaths and U.S. public policy?

Research Motivation:

• The law and finance literature has thus far extensively examined the impact of security law on attracting equity offering. For example, La Porta,  Lopez-De-Silanes, Shleifer (2006) is one of the well cited paper, show that securities law, particularly in relation to IPO and enforcement, matters for facilitating stock market development using data from 49 exchanges around the world. However, there hasn’t much been done in terms of how private exchange trading rule affects secondary market trading activity. To our knowledge, our paper is the first study to systematically examine this question across a wide range of stock markets and countries.
• A large strand of insider trading literature provides evidence supporting the existence of insider trading before the takeover news becomes publicly available. However, the majority of papers focus on target firms. Very few papers touch on the acquirers. However, there exist situations where insiders are unable to trade in target firm’s stock and trading in acquirer’s stocks is the only option. Therefore, it is important to investigate whether there is information leakage and possible illegal insider trading in acquiring firm’s stock.
• The growing awareness of the role for public policy in promoting entrepreneurship has led to increasing efforts for governments around the world to spur entrepreneurial activity and create the next Silicon Valley. The stimulation of entrepreneurship can occur through direct government subsidy programs and legislative changes. In the U.S., government spending grew to over 45% of GDP during the recent economic crisis (Chantrill, 2009), a record level since WWII. The increasing presence of government in stimulating entrepreneurial activity gives rise to a growing need to re-examine the role of public policy on entrepreneurial activity. 

High-level Research Design:

In the first essay, we approach the question by first creating trading rule indices, and then establishing a link between trading rule indices value and three liquidity measures, including velocity, volatility and bid-ask spread, using data from 42 equity exchanges for the period from 2006 to 2008. We also examine whether the introduction of MiFID in November 2007, which increases the indices value for the majority MiFID countries, has a positive impact on trading liquidity.

In the second essay, we examine the pre-announcement price movement of acquiring firm. The event window is [-40, -2] day. AR is calculated using market model with 3 different index returns as proxies of market return. As a robustness check, we also calculated AR using Fama-French model. Univariate and regression analysis are used in our paper.

In the third essay we focus on testing the effect of three main public policy instruments on stimulating entrepreneurial activity. First, we consider the size of government. Second, we consider takings and discriminatory taxation. Third, we consider labour laws and the labour environment. Univariate and regression analysis are used in our paper.