What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms
Amir N. Licht
Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law; European Corporate Governance Institute (ECGI)
Harvard Business School
Jordan I. Siegel
University of Michigan
Hong Kong University of Science & Technology (HKUST)
August 27, 2013
Harvard Business School Strategy Unit Working Paper No. 11-072
On March 29, 2010, the U.S. Supreme Court signaled its intention to geographically limit the reach of the U.S. securities antifraud regime and thus differentially exclude U.S.-listed foreign firms from the ambit of formal U.S. antifraud enforcement. We use this legal surprise as a natural experiment to test the legal bonding hypothesis. This event nonetheless was met with positive or indifferent market reactions based on matched samples, Brown-Warner, and portfolio analyses. These results challenge the value of at least the U.S. civil liability regime, as currently designed, as a legal bonding mechanism in such firms.
Number of Pages in PDF File: 69
Keywords: bonding, enforcement, reputation, cross-listing, corporate governance, civil liability
JEL Classification: G15, G18, G38
Date posted: January 24, 2011 ; Last revised: August 27, 2013
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