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Why do Foreign Firms Leave U.S. Equity Markets?Craig DoidgeUniversity of Toronto - Rotman School of Management George Andrew KarolyiCornell University - Johnson Graduate School of Management Rene M. StulzOhio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI) January 9, 2010 Journal of Finance, Forthcoming Fisher College of Business Working Paper No. 2009-03-003 Charles A. Dice Center Working Paper No. 2009-3 Abstract: Foreign firms terminate their SEC registration in the aftermath of the Sarbanes-Oxley Act (SOX) because they no longer require outside funds to finance growth opportunities. Deregistering firms' insiders benefit from greater discretion to consume private benefits without having to raise higher cost funds. Foreign firms with more agency problems have worse stock-price reactions to the adoption of Rule 12h-6 in 2007, which made deregistration easier, than those firms more adversely affected by the compliance costs of SOX. Stock-price reactions to deregistration announcements are negative, but less so under Rule 12h-6, and more so for firms that raise fewer funds externally.
Number of Pages in PDF File: 58 Keywords: corporate governance, SOX, deregistration, Exchange Act Rule, bonding theory, loss of competitiveness theory JEL Classification: G15, G18, G32, G34, G38, F30 Accepted Paper SeriesDate posted: April 13, 2009Suggested CitationContact Information
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