Title: Regulatory Cooperation among Securities Regulators and Managerial Learning from Stock Prices

Authors: Xiaoqi Chen (Xiamen University), Fangfang Hou (Xiamen University), Jeffrey Ng (The University of Hong Kong), Janus Jian Zhang (Hong Kong Baptist University)

Abstract: The Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU) enhances cross-border cooperation between securities regulators to facilitate the enforcement of securities laws. We use the MMoU’s staggered adoption by countries to study the effect of enhanced regulatory cooperation on managerial learning from stock prices. We find that such learning increases after the firm’s home country enters into the MMoU. This finding is consistent with the view that enhanced regulatory cooperation can help improve stock price informativeness, which in turn has the real effect of enhancing managerial learning from stock prices. We also find that the MMoU's positive effect on investment-q sensitivity is stronger for firms in countries where its adoption has fostered regulatory cooperation more effectively and for firms with higher business uncertainty. The study offers the novel insight that cross-border cooperation between securities regulators has positive externalities for corporate investments.