Why Do Foreign Firms Leave U.S. Equity Markets?
Article first published online: 15 JUL 2010
© 2010 The American Finance Association
The Journal of Finance
Volume 65, Issue 4, pages 1507–1553, August 2010
How to Cite
DOIDGE, C., KAROLYI, G. A. and STULZ, R. M. (2010), Why Do Foreign Firms Leave U.S. Equity Markets?. The Journal of Finance, 65: 1507–1553. doi: 10.1111/j.1540-6261.2010.01577.x
- Issue published online: 15 JUL 2010
- Article first published online: 15 JUL 2010
Foreign firms terminate their Securities and Exchange Commission registration in the aftermath of the Sarbanes–Oxley Act (SOX) because they no longer require outside funds to finance growth opportunities. Deregistering firms’ insiders benefit from greater discretion to consume private benefits without having to raise higher cost funds. Foreign firms with more agency problems have worse stock-price reactions to the adoption of Rule 12h-6 in 2007, which made deregistration easier, than those firms more adversely affected by the compliance costs of SOX. Stock-price reactions to deregistration announcements are negative, but less so under Rule 12h-6, and more so for firms that raise fewer funds externally.