US Stocks Markets Still on Top?

There is anxiety in the industry that the US is losing its edge in world financial markets. More and more foreign-based companies are listing on exchanges closer to home. A fall in large US initial public offerings fuels the concerns.

Some analysts say what’s at stake is the US leadership position as the world’s largest and most prominent capital market. The focus, lately, has been the Sarbanes-Oxley (SoX) law passed in 2002 in the wake of corporate scandals to force more transparency and responsibility. The expensive and overly tiring requirements have prompted commissions
to be organized, town hall meetings called, studies conducted and much more.

Business and financial leaders count Treasury Secretary Henry Paulson as a supporter. John Thornton, former president of Goldman Sachs Group and Glenn Hubbard, a former White House economic advisor are serving to lead the effort. And while there are so many issues on the corporate enemies list, such as overlapping jurisdictions of state and federal securities laws, Sarbanes-Oxley is in competition.

The SEC and the public company accounting oversight board are reviewing the most complained-about provisions. Section 404, which requires external auditing of internal controls, gains much attention. Congress has also held hearings. While it is possible to overdo them, regulations and investors protections are one of the main attractions that US markets hold for companies considering where to list.

According to an Ohio State University study in 2005, investors are ready to pay as much as 31% more for stock in companies listed in a US exchange than those listed in places where the rules are slack. People trust such companies because they can see what’s going on in them. Reports of Charles Niemeier, a member of the Sarbanes-Oxley-created accounting oversight board, show that the US exchanges’ share of new listings began a steep drop six years before the law passed. Since 2002, when the law was passed, the decline has leveled out. Still those forcing to modify the US law have reasons of their own. They do show a weakened US supremacy in the listing of IPOs.