Cross-Listing, Investment Sensitivity to Stock Price and the Learning Hypothesis

Thierry Foucault and Frésard, Laurent

No 8331, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show that the sensitivity of corporate investment to stock price is higher for firms cross-listed in the U.S. than for firms that never cross-list. This difference is strong, does not exist prior to the cross-listing date, and does not vanish over time after this date. Moreover, the impact of a U.S. cross-listing on the investment-to-price sensitivity is stronger for firms that rank high on measures of governance quality, which suggests that our finding is not primarily driven by the improvement in corporate governance associated with a U.S cross-listing. Instead, we argue that a cross-listing enhances managers? reliance on stock prices because it makes stock prices more informative to managers. In support of this learning hypothesis, we find that the positive impact of a U.S. cross-listing on the investment-to-price sensitivity is higher when a cross-listing is more likely to stimulate trading based on information new to managers.

Keywords: Cross-listing; Investment-to-price sensitivity; Managerial learning; Price informativeness (search for similar items in EconPapers)
JEL-codes: G14 G15 G31 G39 (search for similar items in EconPapers)
Date: 2011-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Cross-Listing, Investment Sensitivity to Stock Price, and the Learning Hypothesis (2012)
Working Paper: Cross-Listing, Investment Sensitivity to Stock Price and the Learning Hypothesis (2012)
Working Paper: Cross listing investment sensitivity to stock price and the learning hypothetis (2011)
Working Paper: Cross listing investment sensitivity to stock price and the learning hypothetis (2011)
Working Paper: Cross listing investment sensitivity to stock price and the learning hypothetis (2011)
Working Paper: Cross listing investment sensitivity to stock price and the learning hypothetis (2011)
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