Why Do Foreign Firms Leave U.S. Equity Markets?





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    • Doidge is at the Rotman School of Management, University of Toronto. Karolyi is at the Johnson Graduate School of Management, Cornell University. Stulz is at the Fisher College of Business, Ohio State University, ECGI, and NBER. Warren Bailey, Cam Harvey (Editor), Gerhard Hertig, Greg Miller, two anonymous referees, and an associate editor provided useful comments as did seminar participants at the Chinese University of Hong Kong, HEC Montreal, Ohio State University, Nanyang Technological University, National University of Singapore, Singapore Management University, the Swiss Federal Institute of Technology, and the University of North Carolina Global Issues in Accounting Conference. We thank Paul Bennett, Jean Tobin, Greg Krowitz, and other members of the New York Stock Exchange's Market Listings group for their help with data and background information on listings. Mike Anderson, Aray Gustavo Feldens, Rose Liao, and Xiaoyu Xie provided excellent research assistance. Doidge thanks the Social Sciences and Humanities Research Council of Canada and Karolyi thanks Ohio State University's Dice Center for Financial Economics for financial support.


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.