Question 1
Prior to its enactment in July 2002, the effects of the Sarbanes-Oxley Act were felt apparent subsequent to the fact that its enactment fostered a series of company fails. Inherently Sarbanes-Oxley Act cultivated the downturn of major companies such as Tyco, Enron and WorldCom (Khanna & Palepu, 2010). In addition, this act further caused dire damage on major companies between 2002 and 2004. With such apparent effects, Sarbanes-Oxley Act is more likely to affect the America’s stock exchange in many perceptible ways.
Swath changes subsequent to the enactment of Sarbanes-Oxley Act were deep and profound. To execute the plan of the Sarbanes-Oxley Act, the Public Company Accounting Oversight Board was created. The Public Company Accounting Oversight Board is responsible for monitoring and ensuring that public companies comply with the law. With the above said, the SOX will likely affect the America’s stock exchange based on the notion that these companies will incur extra costs directly attributed to the legislation of the same. In essence, costs related to this act primarily stem from the increased annual audits that will be presented to clients by these companies.
Additionally, these companies will incur extra costs owing the additional liability subsequent to the increased due diligence essential in accomplishing the audits (Khanna & Palepu, 2010). Apart from incurring a lot in preparing audits these companies will have to spend more. Subsequent to the fact that section 404 of this act necessities the need of these companies to design or otherwise purchase a control software. In this way, these companies will end up spending a lot of cash irrespective of the ailing economy, hence affecting the America’s stock exchange. In addition to the above, though this act main intent was to improve confidence of investors in the previously broken market. It is apparent that this will not be achieved in the aftermath because this act has since created a barrier for foreign companies to invest in United Sates and suppress the urge of small sized companies to go public. Essentially, these will likely affect the America’s stock exchange negatively.
Question 2
China being on the rise economically; it is imperative to denote some advantages that China would offer foreign companies to list on its exchange. The following are some of its advantages.
- China is a gateway to the mainland. China particularly Hong Kong is strategically placed in reference to other Asian economies (Szamosszegi & Kyle, 2011)
- China has a well-established legal system that offer an attractive framework for companies to raise funds and give confidence to investors
- China offers a framework to foreign investors where they can expose themselves to the major economies across the world
- China’s system in place offers a platform where free flow of information and capital is achievable. In this way, foreign companies will get attracted by the numerous tax advantages offered (Szamosszegi & Kyle, 2011).
- China has a well-established settlement and clearing infrastructure that relieves of investors the hustle of establishing themselves.
- China has established a framework where valid international accounting standards can be applied by investors.
Apparently, the advantages presented to an investor surpass the disadvantages. Considering that the main barrier that existed stemmed from the restrictions by the legal system, easing these restrictions has made china attractive to investors.
Question 3
Considering the current economical position of China, subsequent to its fastest growing economy, I strongly believe that China will eventually control the world’s financial industry. With the ailing United Sates economy, China will possibly be the next big thing. China is currently investing and seeking economical connections with African countries, and most part of Asia (Khanna & Palepu, 2010). Once they have established a base in these continents, china will have the power to control the world's financial industry finally. Additionally, considering that China is currently recruiting financial specialists from United States, the economical stance of United States will more likely shift to China.
References
Khanna, T., & Palepu, K. G. (2010). Emerging giants. Rivals from developing countries are
invading your turf. How will you fight back?, 35.
Szamosszegi, A., & Kyle, C. (2011). An analysis of state-owned enterprises and state
capitalism in China (p. 89). Capital Trade, Incorporated for US-China Economic and Security Review Commission.
