EECS 1710 Lecture Notes - Lecture 35: Sarbanes–Oxley Act, Mci Inc., Financial Statement
24 Jun 2018
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EECS 1710 Lecture 35 Notes
Introduction
Effect of the Sarbanes-Oxley Act on Foreign Stock Listings
Non-U.S. firms that issue stock in the United States has their shares listed on the New
York Stock Exchange or the Nasdaq market.
By listing their stock on a U.S. stock exchange, the shares placed in the United States can
be easily traded in the secondary market.
In 2002 the U.S. Congress passed the Sarbanes-Oxley Act, which required firms whose
stock is listed on U.S. stock exchanges to provide more complete financial disclosure.
The legislation resulted from financial scandals involving the U.S.-based MNCs Enron
and WorldCom, which had used misleading financial statements to hide their weak
financial condition.
Investors therefore overestimated the value of these companies’ stocks and eventually
lost most or all of their investment.
Sarbanes-Oxley was intended to ensure that financial reporting was more accurate and
complete
Although the cost for complying was estimated to be more than $1 million annually for
some firms
Many non-U.S. firms decided to place new issues of their stock in the United Kingdom,
rather than the United States, so they could avoid complying with the law.
Some U.S. firms that went public also decided to place their stock in the United Kingdom
for the same reason.
Furthermore, some non-U.S. firms listed on U.S. stock exchanges before the Sarbanes-
Oxley Act deregistered after its passage
Such withdrawals may be attributed to the high cost of compliance.
Investing in Foreign Stock Markets
Document Summary
Effect of the sarbanes-oxley act on foreign stock listings. Non-u. s. firms that issue stock in the united states has their shares listed on the new. Such withdrawals may be attributed to the high cost of compliance. Just as some mncs issue stock outside their home country, many investors purchase stocks outside of the home country. Issue stock in the united states has their shares listed on the new york stock exchange or the nasdaq market. By listing their stock on a u. s. stock exchange, the shares placed in the united states can be easily traded in the secondary market. In 2002 the u. s. congress passed the sarbanes-oxley act, which required firms whose stock is listed on u. s. stock exchanges to provide more complete financial disclosure. The legislation resulted from financial scandals involving the u. s. -based mncs enron and worldcom, which had used misleading financial statements to hide their weak financial condition.
