The Impact of the Holding Foreign Companies Accountable Act (HFCAA)

Principal Investigator:
Qian Mao

Abstract:
The Holding Foreign Companies Accountable Act (HFCAA) was signed into law in December 2020. It required certain issuers to establish that they are not owned or controlled by a foreign government. Furthermore, if the Public Company Accounting Oversight Board (PCAOB) was unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities would be delisted from the U.S. exchanges. Thus, we can utilize the HFCAA as a quasi-nature experiment and study how stock exchanges will strike a balance between attracting high quality listings and providing transparent financial information to investors.

Description of Research:
We will empirically test the following questions.
• Has the preference for a U.S. IPO changed after the HFCAA?
• What are the attributes of firms choosing to list on a U.S. exchange in the post-HFCAA era?
• In the long run, how will this affect the competitiveness of U.S. stock exchanges as the global leader in listings?
The answers to these questions will shed light on the economic consequences of the evolving landscape of world financial markets. They will also have profound policy implication for regulators in and outside of the U.S.