What makes the bonding stick? A natural experiment testing the legal bonding hypothesis

• 成果类型: Article
• 署名作者: Licht, Amir N.; Poliquin, Christopher; Siegel, Jordan I.; Li, Xi
• 署名单位: Reichman University; University of California System; University of California Los Angeles; University of Michigan System; University of Michigan; University of Arkansas System; University of Arkansas Fayetteville
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.05.001
• 发表日期: 2018
• 页码: 329-356
• 关键词: Bonding; Class actions; Cross-listing; corporate governance; Civil liability; reputation

摘要

We use a US Supreme Court case, Morrison v. National Australia Bank (2010), as a natural experiment to test the legal bonding hypothesis. By decreasing the potential liability of US-listed foreign firms, particularly due to class action lawsuits, Morrison arguably eroded their legal bonding to compliance with disclosure duties. Nevertheless, we find evidence of an increase or insignificant change in share values. Tests of longer-run effects of the legal event indicate that foreign firms' disclosure quality and likelihood of facing enforcement actions remained stable, as did investors' revealed preferences for trading on US markets. These results go against the legal bonding hypothesis but are consistent with reputational bonding and with market-based accounts of US cross-listing. Our results may contribute to ongoing debate about civil enforcement of securities laws through class actions. (C) 2018 Elsevier B.V. All rights reserved.