Managerial Opportunism and Foreign Listing: Some Direct Evidence

Abstract

This Paper considers the corporate governance aspects of a regulatory program aimed to lure Israeli issuers listed only on U.S. markets to dual-list on the Tel Aviv Stock Exchange. It is a companion to another paper, which analyzes the international regulatory implications of that project (see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=240888). The program provides a rare opportunity to analyze the role of managerial opportunism in foreign listing transactions. In its unique setting, most of the commonly cited motivations for foreign listing are held constant and the costs associated with foreign listing are largely sunk costs. From the vantage-point of most Israeli U.S.-listed issuers, the differences in disclosure duties under the Israeli regime originally intended for them and the American foreign issuer regime refer to corporate governance issues. The staunch resistance from the business and financial sectors to any additional disclosure under Israeli regulation is consistent with managerial reluctance to become subject to a more exacting corporate governance framework. This resistance also sheds light on the role managerial opportunism may play in legislative processes that relate to corporate governance and supports arguments about path dependence in corporate governance systems.