Abstract

http://ssrn.com/abstract=982193
 
 

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Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices over Time


Craig Doidge


University of Toronto - Rotman School of Management

George Andrew Karolyi


Cornell University - Johnson Graduate School of Management

Rene M. Stulz


Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

July 2007

Fisher College of Business Working Paper No. 2007-03-012
ECGI - Finance Working Paper No. 173/2007
Charles A. Dice Center Working Paper No. 2007-9

Abstract:     
We study the determinants and consequences of cross-listings on the New York and London stock exchanges from 1990 to 2005. This investigation enables us to evaluate the relative benefits of New York and London exchange listings and to assess whether these relative benefits have changed over time, perhaps as a result of the passage of the Sarbanes-Oxley Act of Congress (SOX) in 2002. We find that cross-listings have been falling on U.S. exchanges as well as on the Main Market in London. This decline in cross-listings is explained by changes in firm characteristics rather than by changes in the benefits of cross-listing. We show that, after controlling for firm characteristics, there is no deficit in cross-listing counts on U.S. exchanges related to SOX. Investigating the valuation differential between listed and nonlisted firms (the "cross-listing premium") from 1990 to 2005, we find that there is a significant premium for U.S. exchange listings every year, that the premium has not fallen significantly in recent years, that it persists when allowing for unobservable firm characteristics, and that there is a permanent premium in event time. In contrast, there is no premium for listings on London's Main Market for any year. Crosslisting in the U.S. leads firms to increase their capital-raising activity at home and abroad while a London listing has no such impact. Our evidence is consistent with the theory that an exchange listing in New York has unique governance benefits for foreign firms. These benefits have not been seriously eroded by SOX and cannot be replicated through a London listing.

Number of Pages in PDF File: 74

JEL Classification: F30, G15, G34

working papers series


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Date posted: April 25, 2007  

Suggested Citation

Doidge, Craig and Karolyi, George Andrew and Stulz, Rene M., Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices over Time (July 2007). Fisher College of Business Working Paper No. 2007-03-012; ECGI - Finance Working Paper No. 173/2007; Charles A. Dice Center Working Paper No. 2007-9. Available at SSRN: http://ssrn.com/abstract=982193 or http://dx.doi.org/10.2139/ssrn.982193

Contact Information

Craig Doidge
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-8598 (Phone)
HOME PAGE: http://www.rotman.utoronto.ca/facBios/viewFac.asp?facultyID=craig.doidge
George Andrew Karolyi
Cornell University - Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
Rene M. Stulz (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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