Cross-Listing and Corporate Governance: Bonding or Avoiding?
![handle is hein.journals/cjil4 and id is 147 raw text is: Cross-Listing and Corporate Governance:
Bonding or Avoiding?
Amir N. Licht*
I. INTRODUCTION
In their seminal survey of corporate governance, Shleifer and Vishny distill
the issue into a blunt question: How do [the suppliers of finance] make sure
that managers do not steal the capital they supply or invest it in bad projects?'
The Enron/Arthur Andersen debacle and the ensuing waves of scandal vividly
proved that American investors may face this question in the most acute form.
Yet even today, many would argue that in a global comparison, American
securities markets provide public investors with a more hospitable and
protective environment than most other markets around the world. American
markets still fare better in terms of the legal rules governing them, the legal
professionals that work to enforce the regime, and a sophisticated court system
that provides the necessary infrastructure for a well-functioning corporate
governance system. The 2002 wave of scandal tarnished the reputation of the
American market,2 but has not eroded it completely.
The American governance environment is out for rent. Foreign firms
wishing to enjoy the benefits of being subject to the American regime can readily
do so by cross-listing their securities on an American market-even without
raising capital in the United States. The idea that foreign firms actually engage in
cross-listing with a view towards improving their corporate governance is often
Senior Lecturer, Interdisciplinary Center Herzliya, Israel. SJD, Harvard Law School; BA
(economics), Tel Aviv University; LLB, Tel Aviv University. For helpful comments on earlier
versions, I wish to thank Steven Choi, Hwa-Jin Kim, Kon Sik Kim, Jordan Siegel, and
participants of the Conference on Cross-Listing of Emerging Market Companies, Stanford
Law School. Errors remain my own.
1 Andrei Shleifer and Robert W. Vishny, A Survy of Corporate Governance, 52 J Fin 737, 737
(1997).
2 See Edmund L. Andrews, Turmoil at WorldCom: The Overseas Reaction; U.S. Businesses Dim as
Modelfor Foreigners, NY Times Al (June 27, 2002) ([P]eople around the world who for
decades have looked to the United States as the model for openness and accountability in
business have been sorely disillusioned by the mounting waves of scandal.).](ViewImageLocal?handle=hein.journals/cjil4&div=13&collection=journals&method=preview&ext=.png&size=3)
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Cross-Listing and Corporate Governance: Bonding or Avoiding?
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