Abstract

http://ssrn.com/abstract=2163864
 
 

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Securities Litigation Risk for Foreign Companies Listed in the U.S.


Beiting Cheng


Harvard University - Harvard Business School

Suraj Srinivasan


Harvard Business School

Gwen Yu


Harvard Business School

June 2014


Abstract:     
We study securities litigation risk faced by foreign firms listed on U.S. exchanges. We find that U.S. listed foreign companies experience securities class action lawsuits at about half the rate as do U.S. firms with similar levels of ex ante litigation risk. The lower rate appears to be driven partly by higher transaction costs in uncovering and pursuing litigation against foreign firms. However, once a lawsuit triggering event like an accounting restatement, missing management guidance, or a sharp stock price decline occurs, there is no difference in the litigation rates between a foreign and comparable U.S. firm. This suggests that effective enforcement of securities laws is constrained by transaction costs, and the availability of high quality information that reveals potential misconduct is an important determinant of a well-functioning litigation market for foreign firms listed in the U.S.

Number of Pages in PDF File: 52

Keywords: Litigation Risk, Cross Listing, Bonding, 10b-5, Securities Litigation, U.S. Listing, Class Action

JEL Classification: F20, G15, G30, K22, M41

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Date posted: October 19, 2012 ; Last revised: June 18, 2014

Suggested Citation

Cheng, Beiting and Srinivasan, Suraj and Yu, Gwen, Securities Litigation Risk for Foreign Companies Listed in the U.S. (June 2014). Available at SSRN: http://ssrn.com/abstract=2163864 or http://dx.doi.org/10.2139/ssrn.2163864

Contact Information

Beiting Cheng
Harvard University - Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
Suraj Srinivasan (Contact Author)
Harvard Business School ( email )
Soldiers Field
Boston, MA 02163
United States
HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=pub&facId=10700
Gwen Yu
Harvard Business School ( email )
Soldiers Field Road
Morgan 383
Boston, MA 02163
United States
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References:  47
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