What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms

69 Pages Posted: 24 Jan 2011 Last revised: 27 Aug 2013

Amir N. Licht

Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law; European Corporate Governance Institute (ECGI)

Christopher Poliquin

Harvard Business School

Jordan I. Siegel

University of Michigan

Xi Li

Hong Kong University of Science & Technology (HKUST)

Date Written: August 27, 2013

Abstract

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.

Keywords: bonding, enforcement, reputation, cross-listing, corporate governance, civil liability

JEL Classification: G15, G18, G38

Suggested Citation

Licht, Amir N. and Poliquin, Christopher and Siegel, Jordan I. and Li, Xi, What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms (August 27, 2013). Harvard Business School Strategy Unit Working Paper No. 11-072. Available at SSRN: https://ssrn.com/abstract=1744905 or http://dx.doi.org/10.2139/ssrn.1744905

Amir N. Licht

Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law ( email )

P.O. Box 167
Herzliya, 46150
Israel
972-9-952-7332 (Phone)
952-9-9513323 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
952-9-9513323 (Fax)

HOME PAGE: http:/www.ecgi.org

Christopher Poliquin

Harvard Business School ( email )

Soldiers Field Road
Wyss House
Boston, MA 02163
United States
207-415-0546 (Phone)

Jordan I. Siegel (Contact Author)

University of Michigan ( email )

Ann Arbor, MI
United States

Xi Li

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon
Hong Kong

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