IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v18y2013i2d10.1007_s11142-013-9222-2.html
   My bibliography  Save this article

An examination of the impact of the Sarbanes–Oxley Act on the attractiveness of U.S. capital markets for foreign firms

Author

Listed:
  • Peter Hostak

    (City University of Seattle)

  • Thomas Lys

    (Northwestern University)

  • Yong George Yang

    (The Chinese University of Hong Kong)

  • Emre Carr

    (Berkeley Research Group, LLC)

Abstract

We examine whether voluntary deregistrations after the passage of Sarbanes–Oxley Act of 2002 (SOX) were intended to benefit common shareholders by avoiding firms’ costs of complying with SOX or to protect the control rents of managers or controlling shareholders (MCOs). We find that, compared with foreign firms that maintained their SEC registrations, foreign firms that voluntarily deregistered on average had weaker corporate governance, had a significantly less negative stock market reaction when SOX was passed, and suffered a significant price decline when they announced their decision to deregister. We also find evidence indicating that the deregistrations were (to a lesser extent) motivated by firms’ compliance costs related to SOX. Taken together, our results suggest that both agency costs (that is, private benefit of control of the MCOs) and the compliance cost of SOX play a role in motivating foreign firms to withdraw from the U.S. market.

Suggested Citation

  • Peter Hostak & Thomas Lys & Yong George Yang & Emre Carr, 2013. "An examination of the impact of the Sarbanes–Oxley Act on the attractiveness of U.S. capital markets for foreign firms," Review of Accounting Studies, Springer, vol. 18(2), pages 522-559, June.
    • Handle: RePEc:spr:reaccs:v:18:y:2013:i:2:d:10.1007_s11142-013-9222-2
    DOI: 10.1007/s11142-013-9222-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11142-013-9222-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11142-013-9222-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

    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:spr:reaccs:v:18:y:2013:i:2:d:10.1007_s11142-013-9222-2. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.