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What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms

Author

Listed:
  • Xi Li

    () (Department of Accounting, Hong Kong University of Science and Technology
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

  • Amir N. Licht

    () (Interdisciplinary Center Herzliya)

  • Christopher Poliquin

    () (Harvard Business School, Harvard University)

  • Jordan I. Siegel

    () (Harvard Business School, Harvard University)

Abstract

On March 29, 2010, the U.S. Supreme Court signaled its intention to geographically limit the reach of the U.S. securities antifraud regime and thus differentially exclude U.S.-listed foreign firms from the ambit of formal U.S. antifraud enforcement. We use this legal surprise as a natural experiment to test the legal bonding hypothesis. This event nonetheless was met with positive or indifferent market reactions based on matched samples, Brown-Warner, and portfolio analyses. These results challenge the value of at least the U.S. civil liability regime, as currently designed, as a legal bonding mechanism in such firms.

Suggested Citation

  • Xi Li & Amir N. Licht & Christopher Poliquin & Jordan I. Siegel, 2015. "What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms," HKUST IEMS Working Paper Series 2015-19, HKUST Institute for Emerging Market Studies, revised Mar 2015.
  • Handle: RePEc:hku:wpaper:201519
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bonding; enforcement; reputation; cross-listing; corporate governance; civil liability;

    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

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