Cross-Border Regulatory Cooperation and Dividend Policies of US Listed Foreign Firms

We examine the effect of increased regulatory enforcement threat on the dividend policies of foreign firms listed in US stock exchanges. The staggered signing of the Multilateral Memorandum of Understanding (MMoU) by the US and foreign regulators facilitates cross-border regulatory cooperation and information sharing, presenting an exogenous increase in the enforcement threat to US listed foreign firms. The results from difference-in-differences tests show that US listed foreign firms significantly increase their dividend payouts after their home countries sign the MMoU, relative to their home country peers and matched US counterparts. The increase in dividend payouts is greater if foreign firms are from countries with weak governance. The results have important implications for investors and regulators around the world