Although Japanese investments in large, high technology U.S. businesses have won increasing attention recently, a number of small U.S. manufacturing firms are attracting Japanese capital as well. MASI Limited, an investment banking firm, recently raised over $75 million in equity financing from Japanese investors for an Illinois-based rubber goods maker and an Iowa-based machine tools company. Such companies often have a difficult time obtaining financing from U.S. sources, but Japanese investors like them because their shares are lower priced than shares in comparable Japanese firms. In addition, the reporting requirements in Japan are not as bur¬ densome as those in the major U.S. exchanges. REQUIRED:

a. Provide several plausible reasons why a small U.S. firm may wish to raise equity capital only in a non-U.S. market.

b. A partner at Grant Thornton, a large U.S. public accounting firm, commented that “European investors are looking to [provide equity capital for] some mature manufactur¬ ing companies in the United States. Many of these investors are risk-averse and looking for the stability that these companies provide” The Wall Street Journal (July 16, 1990). Explain how this and the case above represent examples of an expanding global capital market, and comment on the implications of such a market for financial accounting and reporting standards.