Foreign institutional ownership and Cross-Listing

Xiangting Kong, Jeff Ng, Albert Tsang and Shuo Yan

Journal of International Money and Finance, 2024, vol. 140, issue C

Abstract: Although foreign institutional ownership (FIO) is generally considered an important outcome of international cross-listings, most studies ignore the iterative nature of FIO—that is, FIO can also serve as a key determinant of cross-listings. Using a comprehensive dataset of international cross-listings of firms from 58 countries between 2001 and 2021, we examine the effect of FIO on firms’ cross-listing decision. Our results show that firms with a higher level of FIO before their cross-listing decision tend to have a significantly higher propensity to cross-list on foreign stock exchanges than firms with a lower level of FIO. Further analyses show that the positive association between FIO and cross-listings is weaker for firms with a better information environment, as evidenced by high analyst following, high media coverage, having a Big 4 auditor, and issuing management earnings forecasts. Additional evidence shows that FIO from countries with more developed institutions has a stronger effect on firms’ decision to cross-list. Taken together, our results are consistent with the argument that the presence of foreign institutional investors in firms signals their low information asymmetry and/or good corporate governance, thereby facilitating these firms’ international cross-listing decision.

Keywords: Foreign institutional ownership; Cross-listing; Corporate governance; Information asymmetry; Institutional investors (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:140:y:2024:i:c:s0261560623001808

DOI: 10.1016/j.jimonfin.2023.102979

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