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The stock market reaction to losing or gaining foreign private issuer status

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  • Burnett, Brian M.
  • Jorgensen, Bjorn N.
  • Pollard, Troy J.

Abstract

The U.S. Securities and Exchange Commission designates foreign-domiciled firms with securities trading in the U.S. markets as either foreign private issuers (FPIs) or domestic filers and permits exemptions from U.S. domestic securities regulation for firms that qualify as FPIs. We study the stock market reaction to foreign-domiciled firms that lose or gain FPI status for an arguably exogenous reason while maintaining their cross-listing status. After loss of FPI status, foreign firms are required to comply with U.S. domestic issuers’ continuous filing requirements, such as filing quarterly financial statements using U.S. GAAP, disclosure of insider trading, and compliance with corporate governance requirements of U.S. domestic issuers. We document a significantly positive market reaction when foreign firms lose their exemptions and must comply with regulatory requirements of U.S. domestic issuers. Further, we find that the market reacts negatively to an increase in financial statement requirements and reacts positively to fully adopting U.S. corporate governance requirements.

Suggested Citation

  • Burnett, Brian M. & Jorgensen, Bjorn N. & Pollard, Troy J., 2017. "The stock market reaction to losing or gaining foreign private issuer status," LSE Research Online Documents on Economics 67900, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:67900
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    File URL: http://eprints.lse.ac.uk/67900/
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    More about this item

    Keywords

    corporate governance; financial reporting; foreign private issuer; market reaction;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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