Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ysm/somwrk/ysm106.html
   My bibliography  Save this paper

A Theoretical Analysis of the Investor Protection Regulations Argument for Global Listing of Stocks

Author

Listed:
  • Oren Fuerst

    (Columbia Business School)

Abstract
Global listing of stocks has become a major topic in international capital markets. Many argue that the U.S. investor protection system discourages foreign firms from listing and raising capital in the U.S. However, there has recently been an increase in the number of foreign firms listing their shares in the U.S. This paper analyzes managers' decision as to which international market to cross-list their firms' shares on. It is shown that when markets differ in their regulatory environment, regulatory strictness may enable managers of highly profitable foreign firms to credibly convey their private information regarding their firms' future prospects. Through listing on the market with strict regulatory environment, those managers deliberately accept additional regulatory exposure, related to investor protection. That increased exposure, however, is more than offset by higher stock prices. The general setting of cross-listing is also shown to be applicable for global public offerings. Furthermore, in contrast to the claim that the strict regulatory environment deters firms from listing on that market, it is shown that a large differential between markets with respect to the regulatory strictness may, in fact, increase the number of firms listing on the market with stricter regulations. The implications of the model are consistent with the empirical evidence regarding global cross-listing.

Suggested Citation

  • Oren Fuerst, 1998. "A Theoretical Analysis of the Investor Protection Regulations Argument for Global Listing of Stocks," Yale School of Management Working Papers ysm106, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm106
    as

    Download full text from publisher

    File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=139599
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ysm:somwrk:ysm106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/smyalus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.