IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v65y2010i4p1507-1553.html
   My bibliography  Save this article

Why Do Foreign Firms Leave U.S. Equity Markets?

Author

Listed:
  • CRAIG DOIDGE
  • G. ANDREW KAROLYI
  • RENÉ M. STULZ

Abstract

Foreign firms terminate their Securities and Exchange Commission registration in the aftermath of the Sarbanes-Oxley Act (SOX) because they no longer require outside funds to finance growth opportunities. Deregistering firms' insiders benefit from greater discretion to consume private benefits without having to raise higher cost funds. Foreign firms with more agency problems have worse stock-price reactions to the adoption of Rule 12h-6 in 2007, which made deregistration easier, than those firms more adversely affected by the compliance costs of SOX. Stock-price reactions to deregistration announcements are negative, but less so under Rule 12h-6, and more so for firms that raise fewer funds externally. Copyright (c) 2010 The American Finance Association.

Suggested Citation

  • Craig Doidge & G. Andrew Karolyi & René M. Stulz, 2010. "Why Do Foreign Firms Leave U.S. Equity Markets?," Journal of Finance, American Finance Association, vol. 65(4), pages 1507-1553, August.
  • Handle: RePEc:bla:jfinan:v:65:y:2010:i:4:p:1507-1553
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6261.2010.01577.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Vidhi Chhaochharia & Yaniv Grinstein, 2007. "Corporate Governance and Firm Value: The Impact of the 2002 Governance Rules," Journal of Finance, American Finance Association, vol. 62(4), pages 1789-1825, August.
    2. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why are foreign firms listed in the U.S. worth more?," Journal of Financial Economics, Elsevier, vol. 71(2), pages 205-238, February.
    3. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July.
    4. Leuz, Christian, 2007. "Was the Sarbanes-Oxley Act of 2002 really this costly? A discussion of evidence from event returns and going-private decisions," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 146-165, September.
    5. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    6. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    7. Marosi, András & Massoud, Nadia, 2007. "Why Do Firms Go Dark?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(02), pages 421-442, June.
    8. Ugur Lel & Darius P. Miller, 2008. "International Cross-Listing, Firm Performance, and Top Management Turnover: A Test of the Bonding Hypothesis," Journal of Finance, American Finance Association, vol. 63(4), pages 1897-1937, August.
    9. Shinhua Liu & John D. Stowe, 2005. "The shareholder wealth effects of voluntary foreign delistings: an empirical analysis," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(4), pages 199-204, July.
    10. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
    11. Schwert, G William, 1981. "Using Financial Data to Measure Effects of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 121-158, April.
    12. Engel, Ellen & Hayes, Rachel M. & Wang, Xue, 2007. "The Sarbanes-Oxley Act and firms' going-private decisions," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 116-145, September.
    13. Dahlquist, Magnus & Pinkowitz, Lee & Stulz, René M. & Williamson, Rohan, 2003. "Corporate Governance and the Home Bias," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 87-110, March.
    14. Nuno Fernandes & Ugur Lel & Darius P. Miller, 2008. "Escape from New York: the market impact of SEC Rule 12h-6," International Finance Discussion Papers 945, Board of Governors of the Federal Reserve System (U.S.).
    15. Hail, Luzi & Leuz, Christian, 2009. "Cost of capital effects and changes in growth expectations around U.S. cross-listings," Journal of Financial Economics, Elsevier, vol. 93(3), pages 428-454, September.
    16. Leuz, Christian & Triantis, Alexander & Yue Wang, Tracy, 2008. "Why do firms go dark? Causes and economic consequences of voluntary SEC deregistrations," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 181-208, August.
    17. Joseph D. Piotroski & Suraj Srinivasan, 2008. "Regulation and Bonding: The Sarbanes-Oxley Act and the Flow of International Listings," Journal of Accounting Research, Wiley Blackwell, vol. 46(2), pages 383-425, May.
    18. Zhang, Ivy Xiying, 2007. "Economic consequences of the Sarbanes-Oxley Act of 2002," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 74-115, September.
    19. Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October.
    20. Chemmanur, Thomas J. & Fulghieri, Paolo, 2006. "Competition and cooperation among exchanges: A theory of cross-listing and endogenous listing standards," Journal of Financial Economics, Elsevier, vol. 82(2), pages 455-489, November.
    21. repec:bla:joares:v:21:y:1983:i:1:p:184-221 is not listed on IDEAS
    22. Litvak, Kate, 2007. "The effect of the Sarbanes-Oxley act on non-US companies cross-listed in the US," Journal of Corporate Finance, Elsevier, vol. 13(2-3), pages 195-228, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:65:y:2010:i:4:p:1507-1553. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/afaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.