Citing a drop in the number of initial public offerings (IPOs) on U.S. markets, Treasury Secretary Henry Paulson called for a "more agile" regulatory framework for publicly traded U.S. companies Nov. 20. Paulson, in a speech to the Economic Club of New York, said the decline in the number of companies seeking a public listing on U.S. exchanges could present a challenge to the country's economic competitiveness going forward.
"Does the decline in initial public offerings in U.S. capital markets signal potentially broader challenges to our competitiveness?" Paulson said.
The Treasury chief said the fall in U.S .IPO activity, coupled with a significant number of American companies deciding to go private, has occurred in the wake of a beefing up regulatory oversight.
U.S. regulatory rules were radically overhauled following a flurry of business scandals in recent years, such as Enron's collapse, which have seen dozens of former high-flying executives jailed.
Paulson said that Europe's principles-based accounting standards had opened up a transatlantic gap with the U.S.' rules-based system. "A rules-based system typically gives more specific guidance than a principles-based system, but it can be too rigid and may lead to a 'tick-the-box' approach," he said. Paulson also said that legal reform would be "crucial" to the long-term competitiveness of the U.S. economy.
"Excessive regulation slows innovation, imposes needless costs on investors, and stifles competitiveness and job creation," Paulson said. "At the same time, we should not engage in a regulatory race to the bottom," he said.
Copyright Agence France-Presse, 2006