Financial Disclosure Levels and Foreign Stock Exchange Listing Decisions

Journal of International Financial Management and Accounting, Vol. 4, No. 2, 1992

44 Pages Posted: 8 Oct 2010 Last revised: 4 Nov 2010

See all articles by Shahrokh M. Saudagaran

Shahrokh M. Saudagaran

University of Washington, Tacoma - Milgard School of Business

Gary C. Biddle

University of Melbourne - Faculty of Business and Economics; Columbia Business School; HKU Business School; London Business School

Date Written: August 6, 1992

Abstract

Firms are increasingly listing their shares on foreign stock exchanges. However, not all exchanges have had equal appeal. Anecdotal evidence suggests that when firms are making foreign listing decisions, they are influenced by financial disclosure requirements. As a result, regulatory authorities around the globe are weighing increasing demands for foreign capital and investment opportunities against the desire to protect domestic investors from possibly misleading foreign financial disclosures. The competitiveness of domestic stock exchanges often hangs in the balance.

This study examines a key question in this debate: whether firms' choices regarding alternative foreign stock exchange listings are influenced by financial disclosure levels. Examined are the listings of 302 internationally traded firms with at least one foreign listing, on one of nine major exchanges, as of year-end 1987. Also examined are changes in listings between 1981 and 1987, an important design feature since these changes are more likely to have been influenced by differences across countries in financial disclosure levels during this period. Financial disclosure levels are obtained from a survey of 142 experts actively involved in the foreign listing process.

Test results based on the cross-section of listings at year-end 1987 are consistent with the hypothesis that exchange choices are influenced by financial disclosure levels. However, they do not lend support to a second hypothesis suggesting that this effect should operate only for firms whose domestic disclosure levels are lower than those of a given foreign exchange. Tests based on changes in listings between 1981 and 1987 support both hypotheses. Overall, the results lend credence to concerns expressed by regulatory authorities and exchange officials that stringent disclosure levels could reduce access to foreign capital and foreign investment opportunities.

Suggested Citation

Saudagaran, Shahrokh M. and Biddle, Gary C., Financial Disclosure Levels and Foreign Stock Exchange Listing Decisions (August 6, 1992). Journal of International Financial Management and Accounting, Vol. 4, No. 2, 1992, Available at SSRN: https://ssrn.com/abstract=1688233

Shahrokh M. Saudagaran

University of Washington, Tacoma - Milgard School of Business ( email )

1900 Commerce Street
Campus Box 358420
Tacoma, WA 98402-3100
United States

Gary C. Biddle (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Level 8, Dept of Accounting
198 Berkeley Street, Carlton
Melbourne, Victoria 3010 3010
Australia
61-3-8344-9807 (Phone)
61-3-9349-2397 (Fax)

HOME PAGE: http://https://findanexpert.unimelb.edu.au/profile/774767-gary-biddle

Columbia Business School ( email )

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HKU Business School ( email )

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London Business School ( email )

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