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http://ssrn.com/abstract=2179088
 
 

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Geography and Capital: Foreign Listings of U.S. Railroads during the First Era of Financial Globalization


David Chambers


University of Cambridge - Judge Business School, Department of Finance & Accounting

Sergei Sarkissian


McGill University

Michael J. Schill


University of Virginia – Darden Graduate School of Business Administration

November 16, 2012

Darden Business School Working Paper No. 2179088

Abstract:     
We study motivations for the globalization of capital markets by examining the role of geography in the financing of U.S. railroad investment from 1866 to 1913. The selected industry and period provide a natural experiment to study the first globalization wave due to the relative underdevelopment of contemporary U.S. financial markets, the dramatic change in global communication technology, the enormity of capital investment needs, and the unique geography-specific nature of railroad assets. We observe an intense level of foreign listing activity in the European markets of London, Amsterdam, and Frankfurt on a scale much larger than that studied in more recent work. We find strong cross-regional variation in foreign listing frequency and its effects. In particular, foreign listing activity of U.S. railroads is inversely related to the distance from U.S. capital sources. In addition, while the overall foreign listing activity of U.S. railroads increases with strong U.S. economic performance, foreign debt listings rise during periods of high U.S. default rates. Our evidence therefore suggests that differences in capital constraints have a profound impact on the geographic distribution of foreign listing activity.

Number of Pages in PDF File: 48

Keywords: Bond cross-listing, Equity cross-listing, Investment-cash flow sensitivity, Market integration

JEL Classification: F36, G15, G30, O16

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Date posted: November 23, 2012 ; Last revised: January 23, 2013

Suggested Citation

Chambers, David and Sarkissian, Sergei and Schill, Michael J., Geography and Capital: Foreign Listings of U.S. Railroads during the First Era of Financial Globalization (November 16, 2012). Darden Business School Working Paper No. 2179088. Available at SSRN: http://ssrn.com/abstract=2179088 or http://dx.doi.org/10.2139/ssrn.2179088

Contact Information

David Chambers (Contact Author)
University of Cambridge - Judge Business School, Department of Finance & Accounting ( email )
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
44 (0)1223 339700 (Phone)
Sergei Sarkissian
McGill University ( email )
1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)
Michael J. Schill
University of Virginia – Darden Graduate School of Business Administration ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)
HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm
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