Legal leapfrogging? Legal system and rule of law effects on cross-listing to bond by emerging-market firms

Joel Malen, Paul M. Vaaler and Ivy Zhang

Chapter 11 in Technological Leapfrogging and Innovation in Africa, 2023, pp 207-244 from Edward Elgar Publishing

Abstract: International management researchers commonly assume that firm location is defined by where it operates, but firms may also change relevant corporate governance standards—engage in legal “leapfrogging”—by cross-listing shares in foreign countries where they have little or no operational presence. We ask why and how firms from emerging-market countries leapfrog legally to the US through cross-listing that “bonds” them to US laws offering stronger protection to investors, particularly minority shareholding investors, and thereby fostering better managerial oversight, broader firm ownership, greater liquidity, and lower capital costs. We develop a cross-level theoretical framework to explain emerging-market firm tendencies to leapfrog legally as a function of three factors: (1) a firm’s home-country legal system; (2) a firm’s home-country rule of law strength; and (3) a firm’s growth options. Analyses of US cross-listing tendencies from 1996 to 2007 among 7,453 firms from 22 emerging-market countries suggests that weaker home-country legal protection and more firm growth opportunities render shifts in legal presence more likely. Our findings highlight the importance of broadening research about how and why firms vary location non-operationally as well as understanding how country-level institutions and firm-level characteristics influence such moves individually and in combination. That broadening would especially benefit business research on Africa, where countries offering weaker legal protection stunt domestic access to capital vital to domestic firms with high growth potential.

Keywords: Business and Management; Development Studies; Economics and Finance; Innovations and Technology; Politics and Public Policy (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/doi/10.4337/9781800370395.00019 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:19935_11

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().