Valuation effects of termination of cross-listings

Roland Füss (), Urich Hommel () and Jan-Carl Plagge ()
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Urich Hommel: EBS Business School, Postal: Department of Finance and Accounting, EBS Business School, EBS Universität für Wirtschaft und Recht, Gustav-Stresemann-Ring 3, D-65189 Wiesbaden, Germany
Jan-Carl Plagge: EBS Business School, Postal: EBS Business School, EBS Universität für Wirtschaft und Recht, Gustav-Stresemann-Ring 3, D-65189 Wiesbaden, Germany

Journal of Financial Perspectives, 2014, vol. 2, issue 1, 177-193

Abstract: In the past, segmentation of capital markets incentivized numerous companies to crosslist in more integrated markets by promising better investor recognition and thereby lowering cost of capital and increasing stock liquidity. In recent years, however, more and more companies have decided to terminate these dual listings. In contrast to previous studies, which mainly focus on the benefits and/or drawbacks of the initial cross-listings, this paper investigates share price effects linked to the termination of cross-listings. A special focus lies on the characteristics of companies’ home markets to explain observed price effects. The empirical results show negative abnormal returns on the event date as well as negative cumulative abnormal returns in the weeks following the announcement of the termination of the secondary listing. The absolute value of the price reaction varies positively with foreign investors’ difficulty to enter the companies’ local market and the fraction of liquidity allocated to the foreign listing prior to the delisting event.

Keywords: ADRs; Cross (De-)Listing; Market Integration; Market Accessibility; Abnormal Returns (search for similar items in EconPapers)
JEL-codes: F36 G15 G28 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofipe:0038

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