The boundaries of the law: can US private enforcement discipline foreign firms?

Existing studies tend to focus on how a legal system reinforces the efficiency of its domestic firms or foreign companies that are subject to its domestic jurisdiction (e.g., via cross-listing). Our study provides critical normative implications in the era of financial globalization by showing that...

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Vydané v:	Journal of international business studies Ročník 56; číslo 1; s. 62 - 83
Hlavní autori:	Massa, Massimo, Wang, Xiaoqiao, Zhang, Bohui, Zhang, Hong
Médium:	Journal Article
Jazyk:	English
Vydavateľské údaje:	London Palgrave Macmillan UK 01.02.2025 Palgrave Macmillan
Predmet:	Academic disciplines Action Action control Analysis Artificial intelligence Borders Boundaries Business Business and Management Business Strategy/Leadership Class action lawsuits Companies Coordination Courts Efficiency Enforcement Financial institutions Foreign companies Global economy Globalization Governance Industrial enterprises Information dissemination Information sharing International Business International finance Jurisdiction Legal institutions Legal system Litigation Management Market shares Markets Organization Peers Personnel policies Researcher subject relations Securities markets Spillover effect Statistical methods Stockholders Valuation Value United States > US Corporate financial policy Governance Lawsuits Valuation Class action
ISSN:	0047-2506, 1478-6990
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Shrnutí:	Existing studies tend to focus on how a legal system reinforces the efficiency of its domestic firms or foreign companies that are subject to its domestic jurisdiction (e.g., via cross-listing). Our study provides critical normative implications in the era of financial globalization by showing that the influence of a country’s legal institutions extend beyond its territorial boundaries. We examine whether US shareholder-initiated class action lawsuits can discipline non-US firms. Using an international sample of firms over the period 1994–2019, we find that a US class action lawsuit against a non-US firm cross-listed in the US negatively affects the value of its non-US-listed industry peers. The effect is robust in both event-based analyses for short-term market reaction and stacked difference-in-difference analyses for long-term valuation. We uncover two economic mechanisms underlying this effect: information sharing and policy coordination between the US and the non-US firm’s home country. Specifically, the cross-border disciplining effect is more pronounced for firms from countries that lack information and that coordinate with the US at the policy level. Moreover, non-US peer firms subsequently improve their governance practices and financial policies to restore shareholder value. Our findings suggest that private enforcement in the US has a worldwide influence.
Bibliografia:	ObjectType-Article-1 SourceType-Scholarly Journals-1 ObjectType-Feature-2 content type line 14
ISSN:	0047-2506 1478-6990
DOI:	10.1057/s41267-024-00746-y