Securities Litigation Risk for Foreign Companies Listed in the U.S.

Cheng, Beiting; Srinivasan, Suraj; Yu, Gwen

doi:10.2139/ssrn.2163864

Cited by 27 publications

(16 citation statements)

References 53 publications

(56 reference statements)

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“…All restatements include sued and non-sued restatements. Data are from Audit Analytics, Srinivasan, Wahid and Yu (2013) and Cheng, Srinivasan and Yu (2013).…”

Section: Resultsmentioning

confidence: 99%

SOX after Ten Years: A Multidisciplinary Review

Coates

Srinivasan²

2013

SSRN Journal

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We review and assess research findings from 120+ papers in accounting, finance, and law to evaluate the impact of the Sarbanes-Oxley Act. We describe significant developments in how the Act was implemented and find that despite severe criticism, the Act and institutions it created have survived almost intact since enactment. We report survey findings from informed parties that suggest that the Act has produced financial reporting benefits. While the direct costs of the Act were substantial and fell disproportionately on smaller companies, costs have fallen over time and in response to changes in its implementation. Research about indirect costs such as loss of risk taking in the U.S. is inconclusive. The evidence for and social welfare implications of claimed effects such as fewer IPOs or loss of foreign listings are unclear. Financial reporting quality appears to have gone up after SOX but research on causal attribution is weak. On balance, research on the Act's net social welfare remains inconclusive. We end by outlining challenges facing research in this area, and propose an agenda for better modeling costs and benefits of financial regulation.

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“…All restatements include sued and non-sued restatements. Data are from Audit Analytics, Srinivasan, Wahid and Yu (2013) and Cheng, Srinivasan and Yu (2013).…”

Section: Resultsmentioning

confidence: 99%

SOX after Ten Years: A Multidisciplinary Review

Coates

Srinivasan²

2013

SSRN Journal

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“…The weak country effect refers to the notion that U.S. regulators have difficulties in gathering evidence and U.S. investors have problems in protecting their legal rights in countries with weak investor protection (e.g., Cheng, Srinivasan, and Yu 2014;McMahon 2012). These problems are exacerbated by the lack of jurisdiction of the U.S. enforcement officials, and by the lack of intention and/or resources that local regulators have in monitoring and disciplining U.S.-listed firms (Jindra et al 2012;Siegel and Wang 2013).…”

Section: The Weak Country Effectmentioning

confidence: 99%

Financial Reporting Quality of Chinese Reverse Merger Firms: The Reverse Merger Effect or the Weak Country Effect?

Chen

Cheng

Lin

et al. 2016

The Accounting Review

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In this paper, we examine why Chinese reverse merger (RM) firms have lower financial reporting quality than U.S. IPO firms. We find that the financial reporting quality of U.S. RM firms is similar to that of matched U.S. IPO firms, but Chinese RM firms exhibit lower financial reporting quality than Chinese ADR firms. We also find that Chinese RM firms exhibit lower financial reporting quality than U.S. RM firms. These results indicate that the use of the RM process is associated with poor financial reporting quality only in firms from China, where legal enforcement and investor protection are weak. In addition, we find that compared with Chinese ADR firms, Chinese RM firms have weaker bonding incentives (as measured by CEO turnover-performance sensitivity) and poorer corporate governance. These factors, in turn, contribute to the lower financial reporting quality of Chinese RM firms. Overall, our results suggest that the less scrutinized RM process allows the Chinese firms with weak bonding incentives and poor governance to gain access to U.S. capital markets, resulting in poor financial reporting quality. JEL Classifications: G15; G24; G34; G38.

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“…As an additional point of comparison to IMR's estimate,Cheng, Srinivasan, and Yu [2012] found that aggregate cost to settle every class action lawsuit filed against a foreign cross-listed firm in the 15-year period from 1996 to 2010 was only $5.9 billion. These suits are again against sponsored ADRs, which face a higher ex ante litigation risk than the sample of unsponsored firms in IMR.…”

mentioning

confidence: 99%

Incorporating Field Data into Archival Research

Soltes¹

2014

J of Accounting Research

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Securities Litigation Risk for Foreign Companies Listed in the U.S.

Cited by 27 publications

References 53 publications

SOX after Ten Years: A Multidisciplinary Review

SOX after Ten Years: A Multidisciplinary Review

Financial Reporting Quality of Chinese Reverse Merger Firms: The Reverse Merger Effect or the Weak Country Effect?

Incorporating Field Data into Archival Research

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