CRAPO: NEW SURVEY UNDERSCORES NEED FOR REFORM IN U.S. CAPITAL MARKETS
Notes excessive litigation, accounting practices and regulations deter U.S. business
Washington, DC - Idaho Senator Mike Crapo, chairman of the Senate Republican Capital Markets Task Force, says an initial public offering (IPO) report released today reinforces the need to strengthen the competitive position of our capital markets. The report, prepared by the Financial Services Forum, cites a number of factors that have created difficulties for U.S. companies. Those include: a larger and more liquid capital markets overseas; a litigation environment in the United States perceived as being unfriendly to companies; regulatory burdens such as Sarbanes-Oxley; high listing fees on U.S. exchanges; and the costs associated with reconciling foreign accounting practices with U.S. standards. The report compiled responses from executives at 334 companies based in the U.S., United Kingdom, Germany, France, India, China and Japan, who have either gone public since the passage of the Sarbanes-Oxley Act, considered going public in the U.S., or de-listed in the U.S.
Crapo said, "American dominance over global capital markets is threatened, and we need to take action to ensure that we maintain our international financial advantages. This report is just the latest one to underscore these looming difficulties. Today's survey makes clear that if we are going to reverse the recent trend of more companies turning to overseas markets to raise capital we are going to have to address litigation reform, reduce onerous regulations, and allow foreign companies to report financial information using International Financial Reporting Standards (IFRS).
"The SEC should be commended for recently approving the use of IFRS accounting standards by foreign companies listed in the U.S. and being committed to strengthening our capital markets global competitiveness," Crapo noted. "It is my hope that this survey will add to the recent momentum to strengthen the competitive position of our capital markets."
"The challenge we are facing is that the U.S. capital markets are losing their competitive edge in intensifying global competition. A key measure of competitiveness, one particularly relevant to the growth of new jobs, is where new equity is being raised - that is, in which markets IPOs are being done. In 2006, more capital was raised through IPOs on the Hong Kong Stock Exchange than on the NYSE and Nasdaq combined. Additionally, the U.S. market share of mega-IPOs (those over $1 billion) has declined from 57 percent in 2001 to 16 percent last year," Crapo concluded.