Why Do U.S. Cross-Listings Matter?

38 Pages Posted: 16 Jun 2008

See all articles by John Ammer

John Ammer

U.S. Federal Reserve Board of Governors

Sara B. Holland

University of Oklahoma - Michael F. Price College of Business

David C. Smith

University of Virginia - McIntire School of Commerce

Francis E. Warnock

University of Virginia - Darden Business School; National Bureau of Economic Research (NBER)

Date Written: May 2008

Abstract

This paper investigates the underlying determinants of home bias using a comprehensive sample of U.S. investor holdings of foreign stocks. We document that U.S. cross-listings are economically important, as U.S. ownership in a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and show that increases in U.S. investment are largest in firms from weak accounting backgrounds and in firms that are otherwise informationally opaque, indicating that U.S. investors value the improvements in disclosure associated with cross-listing. We confirm that relative equity valuations rise for cross-listed stocks, and provide evidence suggesting that valuation increases are due in part to increases in U.S. shareholder demand and in part to the fact that the equities become more attractive to non-U.S. shareholders.

Keywords: Home bias, portfolio choice, financial disclosure, corporate governance

JEL Classification: G11, F21, C35

Suggested Citation

Ammer, John Matthew and Holland, Sara B. and Smith, David Carl and Warnock, Francis E., Why Do U.S. Cross-Listings Matter? (May 2008). FRB International Finance Discussion Paper No. 930. Available at SSRN: https://ssrn.com/abstract=1146605 or http://dx.doi.org/10.2139/ssrn.1146605

John Matthew Ammer (Contact Author)

U.S. Federal Reserve Board of Governors ( email )

20th & C Streets NW
Washington, DC 20551
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202-452-2349 (Phone)
202-452-6424 (Fax)

Sara B. Holland

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

David Carl Smith

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

Francis E. Warnock

University of Virginia - Darden Business School ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-6076 (Phone)

HOME PAGE: http://faculty.darden.virginia.edu/warnockf/index.htm

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138-5398

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