Abstract

http://ssrn.com/abstract=267506
 
 

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Assessing the Cost of Regulatory Protections: Evidence on the Decision to Sell Securities Outside the United States


Stephen J. Choi


New York University School of Law

March 21, 2001

Yale Law & Economics Research Paper No. 253; UC Berkeley Public Law Research Paper No. 51

Abstract:     
This paper examines the factors that affect the decision of U.S. companies to issue securities off-shore compared with inside the United States. Utilizing a data set of 1,444 domestic private placements and offshore offerings from 1993 to 1997, the paper reports that firms that experienced a private securities fraud lawsuit in the past resort to foreign sources of capital more frequently. Similarly, companies in standard industrial classification groups that are targeted more often with private securities fraud litigation are also more likely to issue securities offshore than to conduct domestic private placements. Not all issuers, however, choose to exit the U.S. regime. The paper employs past experience with a SEC investigation as a proxy for the amount of risk that the issuer may pose to investors. Issuers with private securities fraud litigation experience that also encountered a past SEC investigation are more likely to raise capital through a domestic offering, consistent with the hypothesis that some issuers choose to raise capital in the United States when the bonding and signaling value of the U.S. legal liability regime outweighs the costs associated with antifraud liability.

Number of Pages in PDF File: 74

Keywords: securities regulation, corporate finance, private placements, offshore offerings

JEL Classification: K2, L5, G3

working papers series


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Date posted: May 1, 2001  

Suggested Citation

Choi, Stephen J., Assessing the Cost of Regulatory Protections: Evidence on the Decision to Sell Securities Outside the United States (March 21, 2001). Yale Law & Economics Research Paper No. 253; UC Berkeley Public Law Research Paper No. 51. Available at SSRN: http://ssrn.com/abstract=267506 or http://dx.doi.org/10.2139/ssrn.267506

Contact Information

Stephen J. Choi (Contact Author)
New York University School of Law ( email )
40 Washington Square South
New York, NY 10012-1099
United States
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