Why do firms cross-list? International evidence from the US market
Abed AL-Nasser Abdallah () and
The Quarterly Review of Economics and Finance, 2010, vol. 50, issue 2, 202-213
Using a modified international asset-pricing model we find strong evidence that publicly quoted firms cross-list when exhibiting strong performance in their domestic market and wish to take advantage of this situation. After cross-listing, this advantage disappears. Our sample consists of daily data for 1165 firms from 47 countries that have cross-listed on the US equity markets over the period 1976-2007. Within the context of this model we provide tests of the validity of the main hypotheses of capital market segmentation and investor protection, which provide explanations for equity cross-listing and investigate whether the nature of the market (regulated or unregulated) and the accompanying legal framework (common or civil law) can account for the impact of cross-listing on returns. Supporting the segmentation hypothesis, we report a decrease in local market risk after cross-listing. However, we find that the magnitude of such a decrease is diminishing over time as international markets become more integrated. On the other hand, we do not find any change in the global market risk after cross-listing, except for firms that cross-listed between 2001 and 2007, where their exposure to international market risk decreases. Furthermore, we find no evidence to support the investor protection hypothesis.
Keywords: Cross-listing; Segmentation; Investor; protection; CAPM; Event; studies (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:50:y:2010:i:2:p:202-213
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