Chapter 5
Calling the Bluff
Truths, Fictions, and CRMs
Financial professionals are increasingly questioning the costs of the Sarbanes-Oxley Act of 2002 (SOX). Some have argued that SOX has had a chilling effect on the cross-listings of international companies in U.S. markets . . . foreign companies are a boon to U.S. institutional and individual investors because they allow them to take advantage of international diversification without having to trade in a foreign market. Maintaining foreign companies’ presence in the U.S. market would benefit not only the cross-listed foreign companies, but U.S. investors as well.
The authors’ analysis indicates that the passage of SOX has had a detrimental impact on international companies’ decisions whether to cross-list in the United States. The authors find that new ADR cross-listings relative to new domestic listings are at their lowest level in 16 years. This finding, coupled with the fact that ADR delistings relative to domestic delistings are at their greatest level in the past 16 years, reinforces the belief that SOX has had a chilling effect on cross-listings in the United States.
—Hong Zhu and Ken Small, CPA Journal, March 20071
Are U.S. equity markets too tough for foreign issuers to list their shares? The question would seem laughable in the wake of the Chinese stock scandals that kept popping up like so many whack-a-moles between the consecutive halves of 2010 and 2011. Before then, however, the question received serious attention. ...
