The Market Reaction to Cross-Listings: Does the Destination Market Matter?

31 Pages Posted: 3 Dec 2007 Last revised: 1 May 2010

See all articles by Peter Roosenboom

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Mathijs A. van Dijk

Erasmus University Rotterdam (EUR)

Date Written: April 14, 2009

Abstract

This paper examines (i) whether market reactions to cross-listings differ across destination markets and (ii) to what extent the following explanations for value creation around cross-listings can account for differences in market reactions across cross-listings on various destination markets: overcoming market segmentation, increased market liquidity, improved information disclosure, and better investor protection (“bonding”). We analyze 526 cross-listings from 44 different countries on 8 major stock exchanges and document significant announcement returns of 1.3% on average for cross-listings on U.S. exchanges, 1.1% on London Stock Exchange, 0.6% on exchanges in continental Europe, and 0.5% (not significant) on Tokyo Stock Exchange. We find evidence consistent with improved disclosure and bonding creating value for cross-listings on U.S. exchanges, while overcoming segmentation and bonding are associated with higher announcement returns on the London Stock Exchange. The evidence is mixed for continental European exchanges and for Tokyo. Our results highlight the role of the destination market in value creation around cross-listings.

Keywords: Cross-listings, Capital market integration, Investor protection, Market liquidity, Information disclosure

JEL Classification: F30, G14, G15

Suggested Citation

Roosenboom, Peter and van Dijk, Mathijs A., The Market Reaction to Cross-Listings: Does the Destination Market Matter? (April 14, 2009). Journal of Banking and Finance, Vol. 33, pp. 1898-1908, 2009, Available at SSRN: https://ssrn.com/abstract=1047261

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Mathijs A. Van Dijk (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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