SOX has No Impact on Foreign Companies Leaving the U.S.

As recently posted on Harvard Law School Forum on Corporate Governance and Financial Regulation, the authors of a forthcoming paper in the Journal of Finance entitled “Why Do Firms Leave U.S. Equity Markets?,” concludes that the market generally reacts negatively when a foreign company deregisters with the SEC and leaves the U.S. equity markets. The study found that deregistered companies are typically poor performers with lower growth opportunities. 

Interestingly, the study found “no evidence that the stock-price reactions to SOX affect the deregistration decision.” In addition, “there is no clear evidence either that foreign-listed firms reacted poorly to the announcement of SOX or that deregistering firms reacted any more poorly than non-deregistering firms.”  Accordingly, “the impact of SOX on a foreign firm is not a major determinant of its decision to leave the U.S.”