Look at Me Now: What Attracts U.S. Shareholders?

John Ammer, Sara B. Holland, David C. Smith and Francis Warnock

No 12500, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the underlying determinants of home bias using a comprehensive data set on U.S. investors' aggregate holdings of every foreign stock. Among those foreign stocks that are not listed on U.S. exchanges, which account for more than 96 percent of our usable data sample, we find that U.S. investors prefer firms with characteristics associated with greater information transparency, such as stronger home-country accounting standards. We document that a U.S. cross-listing is economically important, as U.S. ownership of a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and find that the increase in U.S. investment is greatest for firms that are from weak accounting backgrounds and are otherwise informationally opaque, suggesting that the key effect of cross-listing is improvements in disclosure that are valued by U.S. investors. By contrast, cross-listing does not increase the appeal of stocks from countries with weak shareholder rights, suggesting that U.S. cross-listing cannot substitute for legal protections in the home country. Nor does the cross-listing effect appear to be driven simply by increased "familiarity"� with the stock or lowered cross-border transactions costs.

JEL-codes: G11 G15 G3 M4 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-acc, nep-fin and nep-fmk
Note: AP CF IFM
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Citations: View citations in EconPapers (23)

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