Question

The reason that some European firms do not sell equity securities in the U.S. or even withdraw their listing from U.S. stock exchanges is because of

a. the threat of confiscation.

b. detailed U.S. disclosure rules.

c. the relative inefficiency of U.S. equity markets.

d. the foreign exchange risk of listing in U.S. dollars.

Answer 1

(b) detailed U.S. disclosure rules. The disclosure rules in the US are very stringent and involve a lot of resources in compliance. Therefore European firms do not sell equity securities in the U.S. or even withdraw their listing from U.S. stock exchanges.

(a) is incorrect. There is no threat of confisication because the US politically stable and financial markets are free and fair

(c) is incorrect. The US markets are highly efficient.

(d) is incorrect. After listing and the funds are raised, there is no foreign exchange risk.