Mark W. Olson, chairman of the Public Company Accounting Oversight Board, today refuted critics of the Sarbanes-Oxley Act who blame its regulatory costs for driving companies away from the U.S. capital markets for raising capital and initial public offerings.
"The U.S. markets have never been the low-cost alternative," Mr. Olson said in a speech to Financial Executives International, an association of CFOs and other financial executives. "Therefore, we should bear in mind all the factors that impact the competitiveness of the U.S. capital markets," including the fact that companies have other sources available for raising capital, including growing non-U.S. markets and the private equity market.
"It is true that the largest IPOs in the last three years have chosen to list on non-U.S. exchanges; however, analysis of these listings indicates that most of them have resulted from privatization of large state-owned companies through sales of minority interests," Mr. Olsen said.
"We also should not lose sight of the fact that the U.S. share of world IPO activity has been on a downward trend since 1996," he added. "This evolution of IPO markets in other countries is not only attributable to changes within U.S. markets but is also a signal of the relative strength and competitiveness of markets overseas. This is something that merits further study."
Also, many blame the high cost of securities litigation "as the most significant force working against U.S. competitiveness," he said, also citing a London Stock Exchange study that found "the relatively higher costs of issuing equity in the United States were mainly due to the systematically higher underwriting fees charged for U.S. transactions."
"The same LSE study observed that regulatory and corporate governance frameworks can have a positive effect on investors," he added.