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What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms

Xi Li (), Amir Licht (), Christopher Poliquin and Jordan Siegel ()
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Xi Li: Department of Accounting, Hong Kong University of Science and Technology
Amir Licht: Interdisciplinary Center Herzliya
Jordan Siegel: Harvard Business School, Harvard University

No 2015-19, HKUST IEMS Working Paper Series from HKUST Institute for Emerging Market Studies

Abstract: On March 29, 2010, the U.S. Supreme Court signaled its intention to geographically limit the reach of the U.S. securities antifraud regime and thus differentially exclude U.S.-listed foreign firms from the ambit of formal U.S. antifraud enforcement. We use this legal surprise as a natural experiment to test the legal bonding hypothesis. This event nonetheless was met with positive or indifferent market reactions based on matched samples, Brown-Warner, and portfolio analyses. These results challenge the value of at least the U.S. civil liability regime, as currently designed, as a legal bonding mechanism in such firms.

Keywords: bonding; enforcement; reputation; cross-listing; corporate governance; civil liability (search for similar items in EconPapers)
JEL-codes: G15 G18 G38 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2015-03, Revised 2015-03
New Economics Papers: this item is included in nep-law
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