An investor protection regulations argument for global listing of stocks: A theoretical analysis and empirical validation.

摘要

The global listing of stocks has become a major topic in international capital markets. Many argue that SEC regulations and the U.S. investor protection system discourage foreign firms from listing and raising capital in the U.S. However, there has recently been an increase in the number of foreign firms listing their shares in the U.S.;I show that regulatory strictness may enable managers of highly profitable foreign firms to credibly convey their private information regarding their firms' future prospects. Through listing on the U.S. market, those managers deliberately accept additional regulatory exposure, related to investor protection. That increased exposure, however, is more than offset by higher stock prices. The general setting of the paper is also shown to be applicable for the special cases of global public offerings and privatizations. Furthermore, in contrast to the claim that the strict regulatory environment deters firms from listing in the U.S., it is shown that a large differential between markets with respect to the regulatory strictness may, in fact, augment the number of firms listing on the market with stricter regulations.;I also provide empirical confirmation to the IPR argument, through the testing of the post-listing operating performance of foreign firms listing on the U.S. market. Using a sample of foreign firms that became cross-listed in the U.S. (matched with similar firms from their home country that did not become cross-listed), I show that: (1) foreign firms cross-listing in the U.S. achieve significant abnormal operating performance in the years following the listing, when compared with similar firms from their home countries, that did not cross-list; (2) the abnormal operating performance (in the years following the listing) is more pronounced, the looser is the investor protection environment in a listing firm's originating country.;Consistent with the findings using the sample of foreign firms, using a sample of U.S. firms that became cross-listed (matched with similar U.S. firms that did not become cross-listed), it is found that those firms do not achieve abnormal operating performance.;While prior literature suggests the positive market reaction to the listing announcement is related to barriers to capital flows, this study documents an association between the improved profitability in the years following the listing and the magnitude of the market reaction to the listing announcement.