Financial constraints and cross-listing

Chunhua Chen, Songhe Shi, Xiaoping Song and Steven Xiaofan Zheng

Journal of International Financial Markets, Institutions and Money, 2021, vol. 71, issue C

Abstract: We examine whether alleviating financial constraints is one of the motives for non-U.S. firms to cross-list in stock markets in the United States. Using payout ratio, payout level, and WW index (Whited and Wu, 2006) as measures of financial constraints, we find that firms with higher financial constraints are more likely to cross-list in the U.S. This pattern is driven by small firms, which tend to be financially constrained. After firms cross-list, they significantly increase their payout ratio and payout level. Small firms have more increases in payouts than large firms. WW index decreases for small firms after cross-listing. Tests about cash flow sensitivities of cash also suggest that the decline in financial constraints is more significant for small firms. Overall the results suggest that relief from financial constraints may be an important motive for cross-listing, especially for small firms.

Keywords: Financial constraints; Cross-listing; Payout; WW index; Cash flow sensitivity of cash (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:71:y:2021:i:c:s1042443121000093

DOI: 10.1016/j.intfin.2021.101290

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