Conventional Wisdom and Numbers

Politicians from both parties say the U.S. capital markets are being suffocated by regulation. In town meetings, op-ed pieces, and industry gatherings, they have attacked the Sarbanes-Oxley Act of 2002 and other corporate reforms for driving companies away from U.S. stock exchanges to other, more business-friendly locales. The statistics, however, paint a somewhat different picture. It turns out that a record number of non-U.S. companies are flocking to NYSE Euronext and NASDAQ to make their initial public offerings. So far this year, 22 companies, many from China and Israel, have raised nearly $4.4 billion on U.S. exchanges, according to Thomson Financial. That's more than even the first half of 2000. The conventional thinking is that Sarbanes-Oxley's tough restrictions on corporate audit practices and internal controls will lead foreign companies to list elsewhere. But companies such as RRSat Global Communications Network Ltd. aren't being frightened off. To be sure, the less regulated London market is attracting its share of foreign IPOs, too. Critics of U.S. regulations still argue that the IPO surge could be even stronger if the stringent rules were eased.

(“SARBOX Isn't Really Driving Stocks Away; Despite the doomsayers, many foreign companies are rushing to list on U.S. exchanges.” By Joseph Weber, with Xiang Ji in Hong Kong. Business Week. New York: July 02, 2007. , Iss. 4041; pg. 87)

QUESTIONS: Do we know what we know in spite of data, or do we find facts to corroborate any position that we may like to see? Can we torture the data until they confess whatever we might like to hear? Can we understand the way things really are if the numbers just won't fall into line for us?