AN EMPIRICAL STUDY OF SELECTED FACTORS INFLUENCING THE DECISION TO LIST ON FOREIGN STOCK EXCHANGES (SECURITIES, INTERNATIONAL ACCOUNTING, REGULATION, UNITED STATES, GREAT BRITAIN)

The accelerated pace of internationalization of financial capital markets raises many research issues. Of special interest is the question of what motivates a firm to list its equity securities on a foreign stock exchange. While an increasing number of firms seem to consider that benefits of foreign listings outweigh the monetary and nonmonetary costs, many other firms have limited their listing shares to their domestic exchanges. Thus, the first major question addressed in this study is the identification of factors influencing firms' decisions to list shares on a foreign stock exchange.;Expert and anecdotal evidence documented in the study also suggests that when firms list on foreign exchanges, financial disclosure requirements may be an important factor in exchange choices. The SEC and regulatory authorities in other countries are currently engaged in public policy debates on appropriate accounting disclosures and listing requirements for foreign and domestic firms. Thus a second major question addressed in this study is whether financial reporting requirements influence choices among alternative foreign stock exchanges.;Tests examining firms' listings on eight major stock exchanges suggest that listing choices are influenced by financial disclosure requirements. Firms from countries with stringent requirements tend to list on exchanges which demand more extensive disclosures while firms from countries with less stringent requirements tend to list on exchanges which require less extensive disclosures.;Computerized data banks in the US and UK and other sources were used to obtain data on 481 of the largest multinational firms for the year 1981. Cross-sectional comparisons between the 223 firms whose shares were traded on at least one foreign exchange and the 258 firms without foreign listings suggest that firm size, nationality and industry influence listing decisions. Additional hypotheses were examined by controlling for firm size, nationality and industry using a subsample of 104 pairs of matched firms. Empirical results indicate significant associations between the likelihood of listing abroad and (1) the relative size of a firm in its domestic capital market and (2) the ratio of foreign to total sales. The ratios of foreign to total assets and foreign to total employees, while possibly significant, appear to be less influential than the relative size and sales ratios.