“The Sarbanes-Oxley Act and Cross-Listed Foreign Private Issuers” by Xi LI
University of Miami
Cross-listed foreign private issuers (FPIs) experience -9.63% and -12.07% abnormal returns in the U.S. and home markets during the events related to the passage and implementation of the Sarbanes-Oxley Act (SOX), whereas Pink Sheets traded FPIs that are exempted from SOX compliance are not affected. These abnormal returns are more negative for better governed FPIs. In the post-SOX period, many more cross-listed FPIs go dark, i.e., voluntarily delist and deregister to eliminate SEC reporting obligations. Although the abnormal returns at the delisting and deregistration announcements are negative in the pre-SOX period, the same returns are significantly positive in the post-SOX period. Our results suggest that SOX imposes excessive compliance costs on cross-listed FPIs.