The Long-Term Effects of Cross-Listing Investor Recognition, and Ownership Structure on Valuation

Michael King and Dan Segal

Staff Working Papers from Bank of Canada

Abstract: The authors show that the widening of a foreign firm's U.S. investor base and the improved information environment associated with cross-listing on a U.S. exchange each have a separately identifiable effect on a firm's valuation. The increase in valuation associated with cross-listing is transitory, not permanent. Valuations of Canadian firms peak in the year of cross-listing and fall monotonically thereafter, regardless of the level of U.S. investor holdings or the ownership structure of the firm. Cross-listed firms with a 20 per cent or more blockholder attract a similar number of U.S. institutional investors as widely held firms, on average, but experience a lower increase in valuation at high levels of investor recognition. While U.S. investors are less willing to invest in firms with dual-class shares, these firms benefit more from cross-listing even when they fail to widen their U.S. investor base, suggesting that the reduction in information asymmetry between controlling and minority investors has a separate impact on valuation for firms where agency problems are greatest.

Keywords: Financial markets; International topics (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2006
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:06-44

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