Cross-Listing and Corporate Governance: Bonding or Avoiding?

By Amir N. Licht. 2003

242 citations recorded by the source corpus.

This paper questions the bonding hypothesis on cross-listing - namely, the idea that firms may want to list on a foreign stock market with a view to renting that market's superior corporate governance system. All too often, cross-listing studies are oblivious to the special structure of the U.S. regulatory regime, which governs foreign issuers. This paper highlights these features and provides a comprehensive survey of the extant empirical evidence. A critical review of this evidence reveals that an opposite, "avoiding hypothesis" more aptly describes firms' cross-listing behavior with regard to corporate governance issues. If anything, more stringent regimes deter issuers, and there is evidence that insiders behave opportunistically with regard to the cross-listing decision.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/e041a21e4ca46e97bc08a6528d59b0c551a37916

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Citations in the corpus

Stock market development and internationalization: Do economic fundamentals spur both similarly? (2006, background): “However, papers have studied these processes separately, working with different methodologies and samples, making comparisons difficult.”
Does International Cross-Listing Improve the Information Environment? (2008, unknown): “Licht (2003) and Siegel (2005) claim that U.S. enforcement is not effective in the case of non-U.”
The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research (2015, background): “For instance, Siegel (2005) raises doubts that the effects are attributable to the protection of outside investors by the U.S. legal system and SEC enforcement, pointing to substantial expropriation by Mexican insiders with impunity (see also Licht, 2003).”
The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation (2006, background): “(2002), Cronqvist and Nilsson (2003), Lins (2003), and Lemmon and Lins (2003).”
Earnings Management and Cross Listing: Are Reconciled Earnings Comparable to US Earnings? (2006, unknown): “In addition, they investigate the extent to 3 See also La Porta et al. (2000) and Licht (2000, 2003) for discussions of the limitations of US enforcement and minority rights protection for cross-listed firms. which foreign issuers comply with explicit SEC filing requirements.”
Corporate Governance, Norms and Practices (2009, background): “They could, for example, do so by subjecting themselves to a better regulatory regime through cross-listing (Licht, 2003; Doidge et al., 2004).”
Why Do Countries Matter so Much for Corporate Governance (2007, background): “Though there are limits to the enforcement of US securities laws on foreign firms (see Black, 2001; Licht, 2003; Siegel, 2005), there might well be no substitute mechanisms for firms from some countries to credibly bond themselves to good governance (see Ball, 2001; Perino, 2003).”
Political Incentives to Suppress Negative Information: Evidence from Chinese Listed Firms (2015, background): “First, in the case of an H-share listing, are the legal protections afforded in Hong Kong substantially different than those available in mainland China? Second, and more generally, are foreign exchanges and regulators able to credibly punish firms that violate host country requirements (Licht, 2003”
International Financial Integration Through Equity Markets: Which Firms from Which Countries Go Global? (2007, unknown): “Licht (2003) and Siegel (2005), for example, find that the host regulators typically provide only limited protection against minority rights abuses by controlling shareholders in the firm’s home country, and thus the value from bonding is limited.”
The market reaction to cross-listings: Does the destination market matter? (2009, unknown): “Licht (2003), Siegel (2005), and Burns et al. (2007) challenge the legal bonding hypothesis for cross-listings in the US.”
Can foreign firms bond themselves effectively by . . renting U.S. securities laws (2005, unknown): “Fanto (1996) goes even further in arguing that SEC disclosure requirements are effectively meaningless, and Licht (2000, 2003) argues that managerial opportunism might lead insiders to take advantage of poor U.S. enforcement.”
International corporate governance: A review and opportunities for future research (2019, unknown): “…& Stulz, 2017; Journal of International Business Studies Filatotchev, Poulsen, & Bell, 2018; Qi, Roth, & Wald, 2017), legal studies (Cioffi, 2000; Licht, 2003; Roe, 2003), political economy (Bulfone, 2016; Landini & Pagano, 2018; Streeck, 2010) and CSR (Aguilera, Williams, Conley, & Rupp, 2006).”