Bonding to the Improved Disclosure Environment in the US: Firms' Listing Choices and their Capital Market Consequences

Abstract

We examine whether current disclosure requirements affect foreign firms' decisions to list on a US exchange. We document that (1) while firms from a weak disclosure environment are more likely to cross-list and either trade OTC or be placed privately, they are less likely to list on an exchange in which firms are required to comply with US GAAP, (2) exchange-listing firms receive a higher valuation than non-exchange-listing firms, and (3) exchange-listing firms domiciled in a higher disclosure regime, who incur lower costs of US GAAP compliance, generally receive a higher valuation than exchange-listing firms from a lower disclosure regime.