The Diminishing Benefits of U.S. Cross-Listing: Economic Consequences of SEC Rule 12h-6

76 Pages Posted: 23 Mar 2016

See all articles by Fan He

Fan He

Central Connecticut State University

Chinmoy Ghosh

University of Connecticut - Department of Finance

Date Written: February 1, 2016

Abstract

On March 21, 2007, SEC passed Rule 12h-6 to make it easier for cross-listed firms to deregister from the U.S. market and escape its regulatory costs. Using difference-in-difference tests, we find that, on average, Rule 12h-6’s passage induced an increase in voting premium, a decline in equity raising, and a decline in cross-listing premium. These effects are observed for exchange-listed firms, and for firms from countries with weak investor protection. We conclude that while cross-listed firms are still valued at a significant premium over non-cross-listed firms, the rule decreased the value of commitment to the U.S. regulatory system.

Keywords: cross listing; deregulation

Suggested Citation

He, Fan and Ghosh, Chinmoy, The Diminishing Benefits of U.S. Cross-Listing: Economic Consequences of SEC Rule 12h-6 (February 1, 2016). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2753397

Fan He (Contact Author)

Central Connecticut State University ( email )

1615 Stanley Street
New Britian, CT 06050
United States

Chinmoy Ghosh

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States
860-486-3040 (Phone)
860-486-0349 (Fax)

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