Is there a cross listing premium for non-exchange traded depositary receipts?

Thomas C O'Connor ()
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Thomas C O'Connor: Economics, National University of Ireland, Maynooth

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: In this paper, I examine the valuation effects of trading in the U.S. as non-exchange issues i.e. Level 1 and 144 firms for non-U.S. firms. The study is motivated by two facts; first, while the number of new Level 2/3 issues has fallen 2001, Level 1 issues have remained an attractive listing option for non-U.S. firms. Second, while on theoretical grounds, firms from low-disclosure regimes have most to gain from exchange listing; these firms tend to list in the U.S. as non-exchange issues. Here, I examine whether the continuing attractiveness of, and the tendency of firms to choose a Level l/144a listing is value enhancing. My results suggest that the tendency on the part of firms from low-disclosure regimes to choose non-exchange issues is justified. Relative to their high-disclosure peers, these firms tend to gain most from trading in the U.S. However, for Rule 144a issues, the valuation gains are short-lived.

Keywords: Cross listing; Level 1; Rule 144a; Tobin's q (search for similar items in EconPapers)
JEL-codes: G15 G34 G35 (search for similar items in EconPapers)
Pages: 24
Date: 2007
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