The Lingering Effects of Country-Level Governance on Cross-Listed Firms

54 Pages Posted: 23 Jul 2008 Last revised: 13 Dec 2009

See all articles by Thomas J. Boulton

Thomas J. Boulton

Miami University

Kuldeep Shastri

University of Pittsburgh - Finance Group

Date Written: December 2009

Abstract

Consistent with studies suggesting that home-country institutions have lingering effects on cross-listed firms, we find that the liquidity of NYSE-listed, non-U.S. firms is related to the perceived institutional quality and governance of the firm‟s home country. Firms from countries perceived as having stronger institutional quality and governance exhibit lower trading costs and less asymmetric information. The enduring effect of home-country institutions extends to non-microstructure measures of information asymmetry, as we find that analyst coverage is positively related to perceived institutional quality and governance. Perception-based measures better explain differences in trading costs than quantitative measures of shareholder rights and earnings quality.

Keywords: ADR, Trading costs, Information risk, Institutional quality

JEL Classification: G10, G15

Suggested Citation

Boulton, Thomas J. and Shastri, Kuldeep, The Lingering Effects of Country-Level Governance on Cross-Listed Firms (December 2009). Available at SSRN: https://ssrn.com/abstract=1163244 or http://dx.doi.org/10.2139/ssrn.1163244

Thomas J. Boulton (Contact Author)

Miami University ( email )

3028 Farmer School of Business
Oxford, OH 45056
United States
(513) 529-1563 (Phone)
(513) 529-8598 (Fax)

Kuldeep Shastri

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~ks112354

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