Genie in a Bottle? Assessing Managerial Opportunism in International Securities Transactions
Posted: 27 Sep 2000
Abstract
How should national securities regulators respond to the growing trend of foreign listing and cross-border trading of stocks? This Article argues that regulatory concern and cooperation are warranted in light of the potential for opportunistic behavior by corporate managers and holders of control blocks. It assesses the likelihood and potential severity of managerial opportunism in the particular context of international securities transactions. Metaphorically, such transactions may be seen as bottles with an occasional genie inside.
The analysis revolves around the motivations for listing a company?s stocks on a foreign market. The foreign listing decision is motivated by a number of factors, most of which work to the benefit of the company and its shareholders. The existing literature, however, fails to provide a clear picture of the role that managerial self-interest may play in the decision to make (or avoid) a foreign listing and in the choice of the particular foreign market. Theoretical models are not unambiguous and empirical evidence is badly lacking. Existing evidence, however, indicates that the foreign listing decision is likely to be influenced by candidate markets' securities regulation regimes on disclosure and insider trading, which may be purposefully onerous to the management. Consequently, unmitigated regulatory competition based on a presumed international "race for the top" cannot be relied on completely to remedy the problem.
JEL Classification: G15, G18, G30, G38, K22, M41, M45
Suggested Citation: Suggested Citation