Regulatory Competition, the SEC, and Access to Capital in China

Abstract

Empirical evidence suggests that in recent years U.S. capital markets have become less competitive. Both U.S. and non-U.S. companies are increasingly turning to foreign and private markets for raising capital. The reasons for this shift are complex and the empirical evidence is murky. Nonetheless, factors include: the decreasing appeal of listing on U.S. exchanges, include more stringent regulation by the SEC of public companies, the increasing competitiveness of European and Asian exchanges, and alternative means of accessing U.S. investors, such non-U.S. exchanges and U.S. private placements.This paper attempts to explain the decreasing competitiveness of U.S. capital markets by focusing on the capital-raising strategies of non-U.S., and in particular Chinese, companies. The paper concludes that a major cause is regulatory and proposes an alternative regulatory standard that the SEC should adopt for non-U.S. companies listing both in the U.S and in their home market.