Foreign Stock Listings: Benefits, Costs, and the Accounting

With increasing opportunities to sell products and services and to obtain capital in foreign markets, firms are weighing the benefits and costs of foreign listings. Among the costs to foreign listings, anecdotal and empirical evidence suggests that accounting disclosure requirements are an important consideration. Recent growth in foreign stock exchange listings poses difficult questions regarding the applicability of domestic reporting requirements to foreign firms. Accounting policymakers and regulatory officials in many countries are grappling with trade-offs between the comprehensiveness of disclosures and the availability of investment opportunities. Under increasing pressure to make foreign securities more accessible to US investors and to enhance the competitiveness of US exchanges, the Securities and Exchange Commission adopted the Integrated Disclosure System in 1982. Other countries, such as Japan, France, and the UK, have also responded to pressures to relax reporting requirements for foreign firms.