The value of firms' voluntary commitment to improve transparency: The case of special segments on Euronext

This paper examines whether a firm's commitment to increase transparency affects firm value and liquidity by studying firms' voluntary decision to be listed in “special segments” created by Euronext. The empirical analysis finds positive valuation effects for firms that opted into the special segments and documents positive effects on the liquidity of these firms. In contrast, when similar market regulations are imposed on all listed firms, and the segments become unavailable, I find marketwide negative valuation effects. The findings suggest that stock exchanges can provide an effective channel that improves firms' liquidity and value; however, when a regulation with similar requirements is imposed on all firms in the market, the effect is less likely to be recognized, at least in the short term.