The Wall Street Journal today has an article about a recent study by Andrew Karolyi and René Stulz of Ohio State University and Craig Doidge of the University of Toronto. The authors conclude that there is no evidence the Sarbanes-Oxley Act disadvantaged the New York stock markets to the London Stock Exchange’s benefit. More interestingly, the study found that investors are still willing to pay a substantially higher equity premium for U.S.-listed investments over and above London-listed ones. The new study also finds that the Sarbanes-Oxley Act did not effect this premium. From 1990 to 2001, non-U.S. companies listed on the main U.S. stock exchanges traded at 17.5% above their non cross-listed peers, or 15.4% when the high-tech bubble year of 1999 is excluded. From 2002 to 2005, it averaged 14.3%. This is strong evidence that the Sarbanes-Oxley Act has not had the corrosive effect on the U.S. competitive position in the global listings market that many have otherwise claimed. It also makes me happy as I made the same conclusions based on other data in my own recent article Regulating Listings in a Global Market.
The study is Craig Doidge, et al., Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices Over Time(April 2007), Charles A. Dice Center Working Paper No. 2007-9; Fisher College of Business Working Paper No. 2007-03.