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The Sarbanes-Oxley Act and the Flow of International Listings
Joseph Piotroski, University of Chicago
Suraj Srinivasan, University of Chicago
ABSTRACT. This paper examines cross-listing behavior onto U.S. and U.K. exchanges following the Sarbanes-Oxley Act, and asks two questions. First, has the rate of cross-listings into U.S. decreased after SOX? Second, are foreign exchanges - in particular, the London Stock Exchange - attracting firms that would otherwise list in the U.S.? We find strong evidence of a post-SOX decrease in foreign listings in the U.S. Our evidence suggests that some of this decline is due to firms bypassing the U.S. to list on the LSE. These “lost” listings consist of smaller and less profitable firms than those that listed in the U.S. post-SOX. We also identify a small set of large, profitable firms primarily from emerging markets that list in the U.S. post-SOX despite being predicted to list in the U.K. Overall, this evidence suggests a shift in both costs and benefits of a foreign listing following SOX and provides evidence of how SOX has altered the flow of listings across international stock exchanges.
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