Title

Stock market reaction to losing or gaining foreign private issuer status

School/Department

Crowell School of Business

Publication Date

3-2017

Abstract

The U.S. Securities and Exchange Commission designates foreign-domiciled firms with securities trading in the U.S. markets as either foreign private issuers (FPIs) or domestic filers and permits exemptions from U.S. domestic securities regulation for firms that qualify as FPIs. We study the stock market reaction to foreign-domiciled firms that lose or gain FPI status for an arguably exogenous reason while maintaining their cross-listing status. After loss of FPI status, foreign firms are required to comply with U.S. domestic issuers’ continuous filing requirements, such as filing quarterly financial statements using U.S. GAAP, disclosure of insider trading, and compliance with corporate governance requirements of U.S. domestic issuers. We document a significantly positive market reaction when foreign firms lose their exemptions and must comply with regulatory requirements of U.S. domestic issuers. Further, we find that the market reacts negatively to an increase in financial statement requirements and reacts positively to fully adopting U.S. corporate governance requirements.

Keywords

Stock exchanges; Corporate governance; Financial statements

Publication Title

Journal of Accounting and Public Policy

Volume

36

Issue

2

First Page

101

Last Page

118

DOI of Published Version

10.1016/j.jaccpubpol.2017.02.001

Link to Full Text

Share

COinS