Essays on the effects of home legal institutions and the Sarbanes-Oxley Act on foreign IPOs in the US

Jona, Jonathan (2013). Essays on the effects of home legal institutions and the Sarbanes-Oxley Act on foreign IPOs in the US. (Unpublished Doctoral thesis, City University London)

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Abstract

The objective of this thesis is to investigate the role of home country legal institutions and the Sarbanes-Oxley Act (SOX) on the reporting quality, pricing and performance of foreign initial public offerings (IPOs) in US capital markets. The specific characteristics of foreign IPOs as have been recognized within the recently expanding literature on cross-listed firms make the focus of this research highly interesting and relevant given the growing number of firm that chose to make their initial public offering in foreign markets, typically the US markets. Using a unique dataset of foreign issuers in the US, this thesis addresses some of the unresolved issues of the impact of institutional differences on information asymmetry in foreign IPOs. To do this, I look at different agency problems over the life cycle of new issuers.

Specifically, the first empirical study of this thesis explores the earnings quality in foreign IPOs in the US and the relation to home country institutions. The second empirical study of this thesis investigates the effects of the home country institutions on the level of underpricing of foreign IPOs in the US, and whether underpricing is significantly different after the enactment of SOX. The third empirical study investigates the effects of the home country institutions on the long-run stock performance of foreign IPOs in the US, and whether performance is significantly different post the enactment of SOX.

The main findings of this thesis suggest that home country legal institutions matter to the reporting characteristics, to the costs of capital at the initial listing date and to the aftermarket stock performance of foreign IPOs in the US. Furthermore, there is mixed evidence regarding the effects of SOX on the reporting characteristics, to the cost of capital at the initial listing date and to the aftermarket stock performance. In contrast with some previous research on cross-listed firms, the results of this study suggest that although foreign IPOs may abandon their home capital markets by listing in the US, their reporting characteristics and costs of capital are nonetheless influenced by home country institutions.

Item Type: Thesis (Doctoral)
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Management
City University London PhD theses
URI: http://openaccess.city.ac.uk/id/eprint/3009

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