are not subject to the legislation, we construct an indicator variable (Exempt) that takes the value one for firms not listed in the U.S. in 2009, and zero otherwise. In contrast, we hypothesize that firms operating in host countries with a high risk of expropriation are likely to experience more negative stock price reactions, since the mandated disclosure could increase the risk of future post-contractual opportunism by host countries. We classify countries as having high or low expropriation risk based on the number of nationalizations in the past. Specifically, firms operating in host countries at the top quartile of nationalization risk are classified as high risk (High We use nationalization data from Exprop. Risk Host Countries). Guriev, Kolotilin, and Sonin (2009), which covers the period from 1962 to late 2006. Firms operating in host countries that prohibit disclosure of government payment data are also expected to suffer more negative stock price reactions. If such firms comply with the new U.S. disclosure laws, they will be in violation of host country laws, potentially generating incremental legal costs and/or limiting business opportunities in those countries. We create an indicator variable (Prohibit that takes the value one for firms operating in one or more Disclosure) of the four countries (i.e. Cameroon, China, Angola, and Qatar) identified in the SEC letters as prohibiting disclosure of local government payments. We anticipate that firms domiciled in relatively low corruption countries are likely to experience more negative stock price reactions to Dodd-Frank as they are more likely to face scrutiny of their host country government payments once the new rule takes effect. Home Country is defined as the World Bank rating of country corruption for each home Corruption firm’s country in 2009. Finally, firms that have fewer operations outside their home country are expected to incur smaller private costs since their host-country operations are less important. We define an indicator
are not subject to the legislation, we construct an indicator variable (Exempt) that takes the value one for firms not listed in the U.S. in 2009, and zero otherwise. In contrast, we hypothesize that firms operating in host countries with a high risk of expropriation are likely to experience more negative stock price reactions, since the mandated disclosure could increase the risk of future post-contractual opportunism by host countries. We classify countries as having high or low expropriation risk based on the number of nationalizations in the past. Specifically, firms operating in host countries at the top quartile of nationalization risk are classified as high risk (High Exprop. Risk Host Countries). We use nationalization data from Guriev, Kolotilin, and Sonin (2009), which covers the period from 1962 to late 2006. Firms operating in host countries that prohibit disclosure of government payment data are also expected to suffer more negative stock price reactions. If such firms comply with the new U.S. disclosure laws, they will be in violation of host country laws, potentially generating incremental legal costs and/or limiting business opportunities in those countries. We create an indicator variable (Prohibit Disclosure) that takes the value one for firms operating in one or more of the four countries (i.e. Cameroon, China, Angola, and Qatar) identified in the SEC letters as prohibiting disclosure of local government payments. We anticipate that firms domiciled in relatively low corruption countries are likely to experience more negative stock price reactions to Dodd-Frank as they are more likely to face scrutiny of their host country government payments once the new rule takes effect. Home Country Corruption is defined as the World Bank rating of country corruption for each firm’s home country in 2009. Finally, firms that have fewer operations outside their home country are expected to incur smaller private costs since their host-country operations are less important. We define an indicator