Financial Accounting: In an Economic Context

INTERNATIONAL PERSPECTIVE: THE RISE OF INTERNATIONAL EQUITY MARKETS

We have referred many times in this text to the New York and American Stock Exchanges and the important roles they play in the buying and selling of equity securities in the United States. As the world of business has become internationalized, however, stock exchanges outside the United States have become increasingly important. The stock of JCPenney, for example, is traded not only on the New York Exchange, but also on exchanges in Antwerp and Brussels; General Electric is traded in New York, London, and Tokyo; Coca-Cola is traded in Frankfurt in addition to five different exchanges in Switzerland; and American Express stock is listed on no less than fifteen stock exchanges, eleven of which are outside the United States. It is also true that many companies outside the United States list their equity securities on U.S. exchanges. Approximately 50 percent of Sony's equity is held in New York, and each year billions of dollars are raised through equity issuances on U.S. stock exchanges by non-U.S. companies. A “world stock exchange” seems to be emerging. In the words of Neil Osborn, author of The Rise of the International Equity: “It is quite possible to trade in a Japanese stock with a buyer in Saudi Arabia, a seller in London, and a U.S. broker without the transaction going near Tokyo.”

FIGURE 12-11 Consolidated statements of shareholders' equity

The increasing level of international equity trading has important ...