The Impact of US GAAP Reconciliation Requirements on Choice of Foreign Stock Exchange for Firms from Common Law and Code Law Countries

The aim of this study is to investigate whether the impact of the SEC’s Form20-F reconciliation requirements on non-US firms’ choices of foreign stock exchanges wasdifferent for firms from common law and code law countries, that is, for firms with differentaccounting, legal and financial systems. We examined attributes of 253 cross-listed firmsfrom the UK, Australia, France, Germany and Japan in the 1999 financial year. We foundthe ability to raise further capital in the home market was relevant for firms from bothgroups. In addition, firms from code law countries listing on the NYSE or NASDAQ weremore likely to have greater foreign revenue and lower leverage. We expected differencesin accounting requirements to be a greater barrier to listing on the NYSE or NASDAQ forcode law firms. However, we found firms from code law countries were more likely toselect a Form 20-F exchange than firms from common law countries, providing support forsuggestions that a NYSE/NASDAQ cross-listing has a bonding role for code law firms.