ABSTRACT
As of August 2012, shares of 522 non-U.S. companies from 46 countries were listed on the New York Stock Exchange (NYSE). An additional 324 foreign firms traded on the Nasdaq. Conversely, 176 American companies traded on the Toronto Stock Exchange and 45 U.S. firms traded in London. Throughout the second half of the twentieth century, German investors
bought shares of Dutch companies, English financiers speculated in Japanese securities, and Americans hunted for bargains on the Hong Kong Stock Exchange. The U.S. Federal Reserve estimated that American investors owned $5.3 trillion of non-U.S. equity securities at the end of 2007. Approximately two-thirds of U.S. equity investors owned foreign shares either directly or through mutual funds. In return, Asian and European investors owned trillions of dollars of U.S. securities. The globalization of the world’s capital markets had three profound
effects on accounting. First, globalization created a demand for internationally accepted accounting standards. Investors in one country wanted to be able to read and understand financial statements prepared in other counties. Multinational corporations, sometimes operating in dozens of countries, wanted a single set of accounting standards with which to keep their accounts. Second, globalization created a demand for internationally accepted auditing standards. Investors sought assurance about the reliability of financial statements prepared abroad. Finally, globalization created competition among the world’s stock exchanges. London’s Alternative Investment Market (AIM), Frankfurt’s Wertpapierbörse, and Amsterdam’s Euronext competed fiercely with stock exchanges in Tokyo, Hong Kong, Luxembourg, and New York to attract the world’s leading corporations.
