NCPA - National Center for Policy Analysis


December 11, 2007

Over the past year, American financial markets have gotten less competitive, says the Wall Street Journal.  That's the judgment of the latest report of the Committee on Capital Markets Regulation, which started a debate last year with its initial study on how and why American public stock markets are losing global market share.  Last week the committee -- a volunteer group of academics, investors and business leaders led by Harvard's Hal Scott -- published its first follow-up report, which highlights two troubling new trends.

  • First, the delisting of foreign companies from U.S. markets leapt this year -- to 56 so far, up from 30 in 2006 and 12 a decade ago; those 56 represented 12.4 percent of all listed foreign companies.
  • In part, the jump is the result of an SEC rule change that lowered the bar for delisting; however, companies that maintain their listings only because they can't escape the SEC, hardly signals confidence in U.S. markets.
  • A second trend is the increasing number of U.S. companies going public outside the United States; between 1996 and 2001, a mere three American companies went public by listing only on a foreign exchange.
  • In the first three quarters of this year, 15 firms made the same choice -- that's 9.2 percent of all U.S. initial public offerings in that period; given the natural affinities to listing in one's home market, this exodus is remarkable.

To put it another way, 80 percent of the foreign companies that raise capital in the United States do so outside of the reach of most of the laws that are supposed to protect investors.  These companies must think the costs of complying with regulation and avoiding litigation are no longer worth the benefits of a ticker symbol on the New York Stock Exchange, says the Journal.

Source: Editorial, "The Other Market Crisis," Wall Street Journal, December 10, 2007.

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