More Litvak on SOX effect on cross-listed firms

We know that foreign firms are avoiding the US after SOX, but is it because of SOX?  Well, there's some evidence on that. 

Kate Litvak has another interesting paper on SOX's negative effect on cross-listing firms, Sarbanes-Oxley and the Cross-Listing Premium. Here's the abstract:

This article tests whether the Sarbanes-Oxley Act (SOX) affected the premium that investors are willing to pay for shares of foreign companies cross-listed in the U.S. I find that from year-end 2001 (pre-SOX) to year-end 2002 (after SOX adoption), the Tobin's q and market/book ratios of foreign companies subject to SOX (cross-listed on levels 2 or 3) declined significantly, relative to Tobin's q and market/book ratios of both (i) matching non-cross-listed foreign companies from the same country, industry, and similar in size, and (ii) cross-listed companies not subject to SOX (listed on levels 1 or 4). Tobin's q and market/book ratios of cross-listed companies not subject to SOX declined only slightly and increased in some specifications, compared to matching non-cross-listed companies. Thus, the premium associated with trading in the U.S. was roughly constant, while the premium associated with being subject to U.S. regulation declined. The biggest losers were companies with higher level of pre-SOX disclosure and smaller companies. These results are consistent with the view that investors expected SOX to have greater costs than benefits for cross-listed firms on average, especially for smaller firms and already well-governed firms.

This goes with Kate's earlier event study on the effect of SOX on cross-listed firms, and this paper, discussed here, co-authored by my Illinois College of Business colleague Paul Vaaler showing a particular effect on emerging market firms.  The post just linked discusses a paper by Zingales, which also shows a negative effect on the cross-listing premium.

It's getting harder and harder to not blame SOX.