Why do foreign firms leave U.S. equity markets? : an analysis of deregistrations under SEC Exchange Act Rule 12H-6 / Craig Doidge, G. Andrew Karolyi, René M. Stulz
- Doidge, Craig
- Cambridge, MA : National Bureau of Economic Research, 
- Copyright Date:
- Physical Description:
- 45 pages : illustrations ; 22 cm.
- Additional Creators:
- Karolyi, G. Andrew
Stulz, René M.
National Bureau of Economic Research
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- NBER working paper series ; working paper 14245
- On March 21, 2007, the Securities and Exchange Commission (SEC) adopted Exchange Act Rule 12h-6 which makes it easier for foreign private issuers to deregister and terminate the reporting obligations associated with a listing on a major U.S. exchange. We examine the characteristics of 59 firms that immediately announced they would deregister under the new rules, their potential motivations for doing so, as well as the economic consequences of their decisions. We find that these firms experienced significantly slower growth and lower stock returns than other U.S. exchange-listed foreign firms in the years preceding the decision. There is weak evidence that firms experience negative stock returns when they announce deregistration and stronger evidence that the stock-price reaction is worse for firms with higher growth. When we examine stock-price reactions around events associated with the passage of the Sarbanes-Oxley Act (SOX), we find negative average stock-price reactions with some specifications but not others. Further, there is no evidence that deregistering firms were affected more negatively by SOX than foreign-listed firms that did not deregister. Our evidence supports the hypothesis that foreign firms list shares in the U.S. in order to raise capital at the lowest possible cost to finance growth opportunities and that, when those opportunities disappear, a listing becomes less valuable to corporate insiders so that firms are more likely to deregister and go home.
- "August 2008."
- Bibliography Note:
- Includes bibliographical references (pages 29-31).
- Other Forms:
- Also available in PDF from the NBER World Wide Web site (www.nber.org).
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