In a paper entitled Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices Over Time, Craig Doidge, G. Andrew Karolyi, and I show that Sarbanes-Oxley (“SOX”) cannot be blamed for the decrease in foreign listings on the New York Stock Exchange and NASDAQ.  A recent revision of the paper, posted here, provides additional supporting evidence for our conclusions.  Before reviewing that additional evidence, I summarize the main results of the paper below.

A popular explanation for the decrease in foreign listings on the exchanges in New York is that the passage of SOX has made U.S. listings significantly less attractive to foreign companies–so much so, it is argued, that many listed firms would delist and deregister if it were easy to do so.  (That explanation, among others, is set forth in a recent report entitled Sustaining New York’s and the US’s Global Financial Services Leadership, prepared for Senator Charles Schumer of New York.)  The argument is that SOX makes a U.S. listing less advantageous because it imposes severe costs on companies and their managers, especially through the compliance requirements of Section 404.  (Section 404 aims to reduce the market impact of accounting “errors” by assuring effective management control over reporting; and, in turn, creates significant legal exposure for companies as well as executives.)

For this popular explanation to be correct, it would have to be that firms that would have chosen to list in the U.S. before SOX are no longer willing to do so.  Our paper shows that:

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