Firm Value, Cross-Listing Premium and the Sarbanes-Oxley Act

This paper presents empirical evidence on the effects of the Sarbanes-Oxley Act of 2002 on the value of firms and on the cross-listing choice of firms destined to three major markets in North America, Asia and Europe. We use dynamic panel data methods and treatment effects methods to find that Sarbanes-Oxley has had a negative impact on the value of firms worldwide. However, the effect of Sox on the cross-listing decision is positive in the US destination and negative in the Germany destination; and the Hong Kong destination seems to attract cross-listing of firms with lower valuations relative to the US and Germany destination. In terms of the cross-listing decision, the evidence is in favor of crowding in the market where the accounting standards are better, lending support to the signaling and bonding hypotheses of cross-listing choice.