United States Securities Regulation and Foreign Private Issuers: Lessons from the Sarbanes-Oxley Act

Abstract

Is the United States losing its position as the world's leading capital market? Recent statistics suggest that U.S. stock exchanges have been losing ground to foreign stock exchanges. The share of equity raised in global public markets represented by the New York Stock Exchange (NYSE), NASDAQ, and the American Stock Exchange (AMEX) combined dropped from 28.8% in 2002 to 23.0% in 2009.1 1Comm. on Capital Markets Regulation, The Competitive Position of the U.S. Public Equity Market 7 (Dec. 4, 2007), available athttp://www.capmktsreg.org/pdfs/The_Competitive_Position_of_the_US_Public_Equity_Market.pdf; World Fed'n of Exch., 2009 Annual Report and Statistics 118, available athttp://www.world-exchanges.org/files/statistics/excel/WFE09%20final.pdf. Foreign delistings from the NYSE rose from 3.9% of all listed foreign companies in 1997 to 8.7% in 2009.2 2Comm. on Capital Markets Regulation, supra note 1, at 21; World Fed'n of Exch., supra note 1, at 104–05. The U.S. market capitalization decreased from 47.8% of the total global market capitalization in 1999 to 31.6% in 2009.3 3 Brown, Elizabeth F., The Tyranny of the Multitude Is a Multiplied Tyranny: Is the United States Financial Regulatory Structure Undermining U.S. Competitiveness?, 2 Brook. J. Corp. Fin. & Com. L. 369, 393– 94 (2008); World Fed'n of Exch., supra note 1, at 102. Market capitalization is as measured by the World Federation of Exchanges. Although in 2000, nine of the top ten initial public offerings (IPOs) in the world took place on U.S. exchanges, by 2005, only one of the twenty-five largest IPOs took place on a U.S. exchange.4 4Eric Pan, Why the World No Longer Puts Its Stock in Us 2–3 (Dec. 13, 2006) (Benjamin N. Cardozo Sch. of Law Jacob Burns Inst. for Advanced Legal Stud. Working Paper No. 176), available athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=951705. In the first half of 2010, Asian exchanges dominated equity IPOs, with $22.6 billion raised on the Shenzhen Stock Exchange and US$8.9 billion raised on the Shanghai Stock Exchange as opposed to $6.7 billion on the NYSE.5 5World Fed'n of Exch., Market Highlights For First Half-Year 2010, 8, available athttp://www.world-exchanges.org/files/file/stats%20and%20charts/July%202010%20WFE%20Market%Highlights.pdf. Commentators argue that one reason for the declining importance of the U.S. stock markets is the high level of regulation in the United States, especially after the passage of the Sarbanes-Oxley Act in 2002.6 6Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat 745 (codified in scattered sections of 11, 15, 18, 28, and 29 U.S.C.) [hereinafter SOX]. Proponents of regulatory competition argue that the U.S. securities regulatory regime is too onerous and that companies should, instead, be allowed to choose which jurisdiction's securities law should apply to them. See, e.g., Choi, Stephen, Regulating Investors Not Issuers: A Market-Based Proposal, 88 Cal. L. Rev. 279 (2000); Choi, Stephen J. & Guzman, Andrew T., Portable Reciprocity: Rethinking the International Reach of Securities Regulation, 71 S. Cal. L. Rev. 903 (1998); Coffee, John C., Racing Towards the Top?: The Impact of Cross-Listings and Stock Market Competition on International Corporate Governance, 102 Colum. L. Rev. 1757 (2002); Palmiter, Alan R., Toward Disclosure Choice in Securities Offerings, 1999 Colum. Bus. L. Rev. 1; Romano, Roberta, Empowering Investors: A Market Approach to Securities Regulation, 107 Yale L.J. 2359 (1998). But there is also a concern that regulatory competition will lead to a race to the bottom. See Cox, James D., Choice of Law Rules for International Securities Transactions?, 66 U. Cin. L. Rev. 1179, 1186 (1998) (arguing the parties should not be able to avoid U.S. securities regulation in private securities transactions partly because there is a “need to protect investors from themselves”). For more on the regulatory competition debate, see Jackson, Howell E. & Pan, Eric J., Regulatory Competition in International Securities Markets: Evidence from Europe in 1999—Part I, 56 Bus. Law. 653, 658 (2001). In response to comment letters from many foreign private issuers requesting exemptions from some of the requirements of SOX, the Securities and Exchange Commission (SEC) did grant certain accommodations. In addition, in 2007, the SEC adopted a rule that allowed certain foreign private issuers to deregister and no longer be subject to U.S. securities regulation (the “deregistration rule”). With the recent global financial crisis, however, there have been renewed calls for more stringent U.S. regulation to prevent future financial crises.7 7 See, e.g., Coffee, John C. & Sale, Hillary A., Redesigning the SEC: Does the Treasury Have a Better Idea?, 95 Va. L. Rev. 707 (2009); Cunningham, Lawrence A. & Zaring, David, The Three or Four Approaches to Financial Regulation: A Cautionary Analysis Against Exuberance in Crisis Response, 78 Geo. Wash. L. Rev. 39 (2009). The current crisis has rattled world markets, resulting in, among other events, the bankruptcy of Lehman Brothers and some foreign governments needing International Monetary Fund packages.8 8 See, e.g., Davidoff, Steven M. & Zaring, David, Regulation by Deal: The Government's Response to the Financial Crisis, 61 Admin. L. Rev. 463 (2009); Okamoto, Karl S., After the Bailout: Regulating Systemic Moral Hazard, 57 UCLA L. Rev. 183 (2009). In a November 17, 2009 speech, SEC Commissioner Kathleen Casey stated that one of the lessons of the current financial crisis is that financial stability depends on investor confidence, which in turn depends on the transparency of financial statements.9 9Kathleen L. Casey, Comm'r, SEC, Lessons from the Financial Crisis for Financial Reporting, Standard Setting and Rule Making (Nov. 17, 2009), available athttp://www.sec.gov/news/speech/2009/spch111709klc.htm. As Congress had directed the SEC to review and study fair value accounting standards, the SEC delivered a report that included several recommendations on changes to fair value accounting standards to Congress which may result in new securities regulations.10 10 Id. In an increasingly global market, it is important for the United States to understand—before undertaking further reforms—the effects of increased securities regulation on the competitiveness of its stock markets. While U.S. securities laws should be reformed to decrease the risk of, and mitigate the effects of, future financial crises, absent a global harmonized regulatory regime, the United States should be careful to minimize the costs imposed by U.S. securities regulation on foreign private issuers.11 11“Foreign private issuer” is defined in Rule 405 promulgated under the Securities Act of 1933 and Rule 3b-4 promulgated under the Securities Exchange Act of 1934. 17 C.F.R. §§ 230.405, 240.3b-4 (2010). The United States benefits from foreign private issuers listing on domestic exchanges. And, U.S. investors find it easier to invest in shares of foreign companies if they are listed in the United States. In addition, foreign private issuers listed in the United States are subject to U.S. securities law, which provides better investor protection than many comparable foreign laws.12 12 See infra Part I.A. The experience of foreign private issuers accessing the U.S. market in the 2000s, especially after SOX and the deregistration rule, provides useful guidance regarding the effect of strengthened U.S. securities law on the attractiveness of U.S. markets for foreign private issuers. In this article, I examine the impact of post-SOX strengthening of U.S. securities law on the conduct of foreign private issuers. Part I provides some general background about foreign private issuers listing in the United States. It starts by discussing the benefits to the United States of having foreign private issuers list on U.S. exchanges. Part I also explores the costs and benefits of listing in the United States for foreign private issuers, especially in light of potential flowback13 13“Flowback” refers to American investors choosing to convert their American Depository Receipts (ADRs) into ordinary shares that are traded on non-U.S. stock markets. problems and the increasing availability of foreign exchanges as alternatives to the U.S. exchanges. Next, in Part II, I discuss the legal regime facing foreign private issuers, looking at the SEC's pre-SOX attempts to make the U.S. markets more attractive to them, at the controversy over the application of SOX to foreign private issuers, and at the SEC's post-SOX accommodations for foreign private issuers. Part II also reviews prior studies on SOX's effects on foreign private issuers. Part III then describes my three studies of foreign private issuers' behavior after SOX. The first study looks to see if, in a given region, the median relative U.S. trading volume14 14“Relative U.S. trading volume” refers to the trading volume the issuer obtains in the United States over the trading volume the issuer obtains in its home market. “Trading volume” is the number of shares of a security traded in a given market during a given day. For details on the calculation for relative U.S. trading volume, see infra Part III.A.1. of issuers that delist tends to be lower than the median relative U.S. trading volume of issuers that do not and to see which region's issuers are likely to find the United States to be a less important market. For each of the six regions15 15The six regions are East Asia, Europe, Latin America, Japan, Israel, and Australia. See infra Part III.A.1. I studied, issuers who remain listed on the U.S. exchanges as of January 31, 2010 tend to have lower relative U.S. trading volumes than those who voluntarily delisted16 16Issuers who voluntarily delisted are those who exited the U.S. market other than (i) those who were delisted by a U.S. exchange or (ii) those who were merged into another company. before January 31, 2010. Issuers from developed countries tend to have lower relative U.S. trading volumes. My second study finds that more issuers from regions with lower relative U.S. trading volume voluntarily delisted from the United States after the passage of SOX. My third study reviews SEC filings, cataloging the reasons foreign private issuers give for delisting. Many of the delisting issuers stated in press releases filed with the SEC that their low trading volumes in the United States did not justify the costs of being listed in the United States, especially after the additional regulatory burden imposed by SOX. Finally, I conclude by looking at the implications of the finding that issuers from developed regions with low relative U.S. trading volumes are more likely to delist as a result of increased securities regulation imposed by SOX. Because issuers from more developed countries are better investment prospects for U.S. investors, the SEC should consider granting these foreign issuers exemptions from any new U.S. securities regulations, to encourage them to continue listing in the United States. This part provides some general background, discussing the reasons the United States wants to encourage foreign private issuers to list on its exchanges. To maintain these benefits, the United States must ensure that a U.S. listing provides foreign private issuers with more benefits than costs, especially as foreign private issuers may face flowback problems, and foreign securities exchanges are increasingly becoming viable alternatives to U.S. exchanges. This part discusses the benefits and costs for foreign private issuers listing in the United States. Understanding both the benefits to the United States of having foreign issuers list on U.S. exchanges and what foreign private issuers perceive to be the benefits and costs of listing in the United States then assists in a determination of which foreign private issuers should be encouraged to list in the United States and how the U.S. securities regulations might be used to encourage these issuers to list. U.S. retail investors and the overall U.S. capital markets benefit from foreign private issuers listing in the United States. Investing in foreign companies provides investors with diversification, allowing them to select the optimal trade-off between risk and return.17 17U.S. Chamber of Commerce Comm'n on the Regulation of U.S. Capital Markets in the 21st Century, Report and Recommendations 39 (Mar. 2007), available athttp://library.uschamber.com/sites/default/files/reports/0703capmarkets_full.pdf [hereinafter U.S. Chamber of Commerce Comm'n Report]; Jackson, Howell E., A System of Selective Substitute Compliance, 48 Harv. Int'l L.J. 105, 111 (2007); Tafara, Ethiopis & Peterson, Robert J., A Blueprint for Cross-Border Access to U.S. Investors: A New International Framework, 48 Harv. Int'l L.J. 31, 41 (2007). Further, foreign companies are attractive to U.S. retail investors because many of the fastest-growing companies are foreign companies.18 18U.S. Chamber of Commerce Comm'n Report, supra note 17, at 39; Davidoff, Steven M., Regulating Listings in a Global Market, 86 N.C. L. Rev. 89, 115– 16 (2007); Jackson, supra note 17, at 111; Tafara & Peterson, supra note 17, at 48. U.S. retail investors can invest abroad but they face certain barriers. First, there are risks associated with investing in a foreign market.19 19Jackson, supra note 17, at 112; Tafara & Peterson, supra note 17, at 41–42. U.S. retail investors investing abroad may be unaware that they are investing in securities not subject to SEC oversight.20 20Jackson, supra note 17, at 112; Tafara & Peterson, supra note 17, at 42. Foreign countries may not have an effective legal enforcement regime.21 21Tafara & Peterson, supra note 17, at 42. It is easier and less risky for U.S. retail investors to invest in foreign companies if they are listed in the United States.22 22U.S. Chamber of Commerce Comm'n Report, supra note 17, at 39; Tafara & Peterson, supra note 17, at 41. Listing in the United States subjects the foreign private issuer to U.S. securities law, which gives better investor protection than comparable law in many foreign jurisdictions.23 23Tafara & Peterson, supra note 17, at 42; Doidge, Craig G. et al., Why Are Foreign Firms Listed in the U.S. Worth More?, 71 J. Fin. Econ. 205, 209 (2004). Second, there are transactional costs associated with investing abroad. To invest abroad, U.S. investors often either have to trade on a foreign exchange through a U.S.-registered broker, thereby having to go through two layers of intermediaries, or have to open an account with a foreign broker.24 24Jackson, supra note 17, at 111; Tafara & Peterson, supra note 17, at 47–48. U.S. retail investors may also lack adequate information about these foreign companies because foreign private issuers and foreign financial broker-dealers that do not comply with SEC registration and compliance requirements are not able to directly solicit U.S. retail investors.25 25U.S. Chamber of Commerce Comm'n Report, supra note 17, at 39; Jackson, supra note 17, at 111; Tafara & Peterson, supra note 17, at 48. Maintaining an environment friendly to foreign private issuers is important to the United States remaining the global financial center. Foreign private issuers constitute a significant portion of the IPOs and listings in the United States.26 26Brown, supra note 3, at 395. U.S. exchanges benefit from being able to obtain listing and trading fees, one of their major sources of revenue, from foreign private issuers that list on them.27 27Davidoff, supra note 18, at 127–28. For the schedule of fees paid to NYSE, see http://www.nyse.com/regulation/nyse/1147474807417.html (last visited Oct. 15, 2010). Regarding NASDAQ's fees, see NASDAQ, Listing Standards and Fees ( July 2010), available athttp://www.nasdaq.com/about/nasdaq_listing_req_fees.pdf. Keeping the U.S. markets attractive to foreign private issuers is important for maintaining the dominance of U.S. financial services sector, an important sector for the United States. One out of every nineteen Americans works in financial services and the industry represents eight percent of the U.S. gross domestic product.28 28Michael R. Bloomberg & Charles E. Schumer, Sustaining New York's and the US' Global Financial Services Leadership 10 ( Jan. 2007), available athttp://www.nyc.gov/html/om/pdf/ny_report_final.pdf. The financial services industry is also one of the fastest-growing sectors in the U.S. economy.29 29 Id. Continued growth in this industry provides the United States with jobs and tax revenues.30 30 Id. at 9–10. To obtain such benefits, the United States needs to make sure that the benefits of listing in the United States for desirable foreign companies outweigh the costs. Foreign private issuers typically list in the United States for financial considerations such as increased liquidity, potentially lower cost of equity capital, a desire to increase their U.S. shareholder base, and ability to raise money from equity.31 31 See G. Andrew Karolyi, What Happens to Stocks That List Shares Abroad? A Survey of the Evidence and Its Managerial Implications 34–35 (Sept. 1996) (NYSE Working Paper No. 96-04), available athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1612; Bancel, Franck & Mittoo, Usha R., European Managerial Perceptions of the Net Benefits of Foreign Stock Listings, 7 Eur. Fin. Mgmt. 213, 224– 25 (2001) (surveying European managers); Fanto, James A. & Karmel, Roberta S., A Report on the Attitudes of Foreign Companies Regarding a U.S. Listing, 3 Stan. J.L. Bus. & Fin. 51, 63– 66 (1997); Mittoo, Usha R., Managerial Perceptions of the Net Benefits of Foreign Listing: Canadian Evidence, 4 J. Int'l Fin. Mgmt & Acct. 40, 58 (1992) (surveying managers of Canadian companies cross-listed in the United States and the United Kingdom); Pagano, Marco et al., The Geography of Equity Listing: Why Do Companies List Abroad?, 57 J. Fin. 2651, 2685– 87 (2002) (looking at companies listed on ten major European exchanges and seeing who listed in the United States rather than in Europe). Listing in the United States also provides foreign private issuers with acquisition currency, prestige, and publicity.32 32 See Bancel & Mittoo, supra note 31, at 224–25; Fanto & Karmel, supra note 31, at 63–66. Some foreign private issuers list because all the companies in the relevant industry list in the United States.33 33 See Fanto & Karmel, supra note 31, at 52, 63–66. Another potential reason to list in the United States is that U.S. investors may be better able to identify which of the new, innovative firms are likely to succeed.34 34 See Asher Blass & Yishay Yafeh, Vagabond Shoes Longing to Stray: Why Foreign Firms List in the United States 16 (unpublished manuscript, on file with author), available athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=248948. Previous studies have found that foreign private issuers' perceptions of the benefits of listing in the United States have a basis in reality. Studies have found that cross-listing in the United States leads to increased liquidity,35 35 See Foerster, Stephen R. & Karolyi, G. Andrew, International Listings of Stocks: The Case of Canada and the US, 24 J. Int'l Bus. Stud. 763, 773– 79 (1993) (looking at fifty-three Toronto Stock Exchange–listed stocks that listed on U.S. exchanges from 1981 to 1990); Karolyi, supra note 31, at 26. decreased exposure to domestic market risk,36 36 See Foerster, Stephen R. & Karolyi, G. Andrew, The Effect of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stock Listing in the United States, 54 J. Fin. 981, 986, 1008 (1999) (looking at 153 firms from eleven countries that listed in the United States between 1976 and 1992); Karolyi, supra note 31, at 21. But see Jeff Madura et al., Use of ADRs to Circumvent Segmented Markets and Its Effect on Risk, 5 J. Int'l Sec. Mkts. 339, 342 (1991) (concluding, from twenty-six ADRs between October 1987 and October 1990, that total risk decreased significantly for British firms but not for non-British firms after the issuance of the ADRs). and increased visibility37 37 See Baker, H. Kent et al., International Cross-Listings and Visibility, 37 J. Fin. & Quantitative Analysis 495, 500– 02, 516–18 (2002) (concluding, from a study of analysts following a firm one year before and one year after a firm was listed in the NYSE or London Stock Exchange and from the number of times a firm is cited in the Wall Street Journal and the Financial Times during the period in question, that analyst coverage and newspaper citation increase after listing on the NYSE). for foreign private issuers. Cross-listing seems to reduce the cost of capital and increase share price for foreign private issuers, although both the extent and the duration of these effects are unclear.38 38 See Katherine Smith & George Sofianos, The Impact of an NYSE Listing on the Global Trading of Non-U.S. Stocks 2–3 (1997) (NYSE Working Paper No. 97-02) (studying 128 foreign stocks listed on the NYSE between 1985 and 1996 and concluding that while stocks from developed markets earned on average thirty-percent increase in home market value of trading after listing, stocks from developing markets experience only a slight increase in home market trading); Costa, Newton C.A. et al., The Market Impact of Cross-Listing: The Case of Brazilian ADRs, 2 Emerging Mkts. Q. 39, 43 (1998) (looking at eight Brazilian stocks listed in the United States or traded on over-the-counter markets between 1991 and 1996 and finding no evidence of abnormal returns around listing day); Errunza, Vihang R. & Miller, Darius P., Market Segmentation and the Cost of Capital in International Equity Markets, 35 J. Fin. & Quantitative Analysis 577, 581, 588, 597– 98 (2000) (concluding, from 126 foreign stocks that announced their first ADRs between 1985 and 1994, that cross-listing reduces the cost of capital for foreign firms); Foerster & Karolyi, supra note 36, at 1008 (finding that foreign stocks earned a significant average excess return during the year before listing and also during the listing week but that shares declined significantly on average during the year after listing); Karolyi, supra note 31, at 35 (finding that share prices increased in the first month after listing but that returns during the year after listing varied considerably); Miller, Darius P., The Market Reaction to International Cross-Listings: Evidence from Depositary Receipts, 51 J. Fin. Econ. 103, 108– 09, 121–22 (1999) (concluding, from 181 foreign stocks that announced their first ADR programs between 1985 and 1995, that positive abnormal returns around the announcement date of a listing were greatest for firms that list on major U.S. exchanges); Sundaram, Anant K. & Logue, Dennis E., Valuation Effects of Foreign Company Listings on U.S. Exchanges, 27 J. Int'l Bus. Stud. 67, 73– 76, 85 (1996) (finding same effect from studying postlisting equity prices of foreign firms listed on the NYSE and the AMEX between 1982 and 1992). But see Sarkissian, Sergei & Schill, Michael J., Are There Permanent Valuation Gains to Overseas Listing?, 22 Rev. Fin. Stud. 371 (2009) (finding that, although there was an increase in returns prelisting, there was a decline for up to several years after listing and that, overall, there was little evidence of a permanent effect on returns for firms cross-listing). While private placement depositary receipts for foreign private issuers tend to underperform their home market benchmarks, equities issued on major U.S. public exchanges tend to outperform the relevant benchmarks.39 39Doidge et al., supra note 23, at 235; Foerster, Stephen R. & Karolyi, G. Andrew, The Long-Run Performance of Global Equity Offerings, 35 J. Fin. & Quantitative Analysis 499, 525 (2000). Foreign private issuers obtain more of a valuation premium if they come from markets with lower accounting standards or lower levels of investor protection.40 40Doidge et al., supra note 23, at 235; Foerster & Karolyi, supra note 39, at 525. The increased valuation may be because investors see a firm's willingness to list on an exchange with a stricter disclosure environment as a signal of confidence about its future earnings.41 41 See Cheung, C. Sherman & Lee, Jason, Disclosure Environment and Listing on Foreign Stock Exchanges, 19 J. Banking & Fin. 347, 348 (1995). Listing in the United States may also increase the value of the firm's shares because it limits the ability of a controlling shareholder to extract private benefits from the firm42 42 See Doidge, Craig G., U.S. Cross-Listings and the Private Benefits of Control: Evidence from Dual-Class Firms, 72 J. Fin. Econ. 519 (2003) (finding that foreign firms that list in the United States and are subject to U.S. securities regulation tend to have lower voting premium than firms that do not, especially if these foreign firms are from countries with weak minority shareholder protection); Doidge et al., supra note 23. See also Dyck, Alexander & Zingales, Luigi, Private Benefits of Control: An International Comparison, 59 J. Fin. 537 (2004). and because it results in non-U.S. firms getting greater analyst coverage and increased forecast accuracy.43 43 Lang, Mark H. et al., ADRs, Analysts, and Accuracy: Does Cross Listing in the United States Improve a Firm's Information Environment and Increase Market Value?, 41 J. Acct. Res. 317 (2003). Foreign private issuers that list in the United States tend to use their equity to finance acquisitions and to enter into larger acquisitions than do foreign companies not listed in the United States.44 44Natasha Burns, Evidence from Takeovers of U.S. Firms, The Role of Cross-listed Stock as an Acquisition Currency 23 (Sept. 2004) (unpublished manuscript, on file with author), available athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=587921; Tolmunen, Pasi & Torstila, Sami, Cross-Listings and M&A Activity: Transatlantic Evidence, 34 Fin. Mgmt. 123 (2005). Firms from different geographic regions list in the United States for different reasons. For European issuers, the main reason to list in the United States is better valuation, followed by prestige and the desire to obtain acquisition currency.45 45 See Jackson, Howell E. & Pan, Eric J., Regulatory Competition in International Securities Markets: Evidence from Europe in 1999—Part II, 3 Va. L. & Bus. Rev. 207, 224– 25 (2008); see also Pagano et al., supra note 31, at 2686 (finding that advantages of listing in the United States are (1) the presence of skilled analysts and institutional investors, (2) greater liquidity than in Europe, and (3) a huge product market). The reasons Japanese firms list in the United States vary depending on their size: large Japanese firms list mainly to signal they can comply with the strict U.S. securities law disclosure requirements and to gain greater prestige and brand recognition; liquidity is a less important factor because the Japanese market is relatively liquid.46 46See Patrick M. Dougherty, Regulation of Japanese Issuers Entering U.S. Public Equity Markets 30–31 (2002) (unpublished manuscript, on file with author). Smaller Japanese firms, on the other hand, list to take advantage of increased liquidity and relative mispricing.47 47 See id. at 3. For issuers from other Asian countries, the main reason to access U.S. markets is better valuation derived from the greater liquidity, followed by prestige.48 48 See Thomas K. Cheng, Regulatory Competition in International Securities Markets: Evidence from Asia in 2000 and 2001, 19 (2002) (unpublished manuscript, on file with author); Fung, Erica, Regulatory Competition in International Capital Markets: Evidence from China in 2004–2005, 3 N.Y.U. J.L. & Bus. 243, 259– 61 (2006). Asian issuers have found that they need to go to the U.S. market for large transactions (any transaction over $1 billion). See Cheng, supra, at 13, 19–20. Some Asian Internet and technology firms list in the United States because they cannot meet their home market's listing requirements.49 49Cheng, supra note 48, at 19. In addition, the Chinese government has encouraged some Chinese state-owned enterprises (SOEs) to list in the United States to try to accelerate the pace of their reform; for example, to comply with U.S. securities requirements, listed SOEs must institute effective internal controls systems.50 50 Id. at 21; Fung, supra note 48, at 261. Finally, listing in the United States allows Chinese firms to convert their yuan-denominated profits to U.S. dollars, allowing them to obtain acquisition currency.51 51Fung, supra note 48, at 262. Israeli firms list in the United States to be subject to lower regulation: if they are listed on a U.S. exchan