Committee on Capital Markets Regulation

The first report to the Committee on Capital Markets Regulation, authored by Luigi Zingales (Chicago Bus. School), found that the premium for listing on both United States and a foreign market for foreign companies has dropped significantly since 2002.  Shares of a foreign company are worth more if they are listed on the United States markets as well as home markets.  In theory, investors will pay more for the stock because they have more confidence in a company covered by the United States regulatory system.  The cross listing premium has declined significantly for company also listed in countries with a well regarded corporate governance controls of their own (e.g., Canada, Hong Kong, Japan and the UK).  The premium remains robust only for countries with weak corporate governance controls (e.g., Italy, Austria, Brazil and Turkey).  The implication -- the United States is losing its competitive edge in corporate governance regulations to several other countries with competitive financial markets.