Is There a Cross Listing Premium for Non-Exchange Traded Depositary Receipts?
International Research Journal of Finance and Economics, No. 25, pp. 183-202, 2009
20 Pages Posted: 12 Jan 2010
Date Written: 2009
In this paper, I examine the valuation effects of trading in the U.S. as non-exchange issues i.e. Level 1 and 144 firms for non-U.S. firms. The study is motivated by two facts; first, while the number of new Level 2/3 issues has fallen 2001, Level 1 issues have remained an attractive listing option for non-U.S. firms. Second, while on theoretical grounds, firms from low-disclosure regimes have most to gain from exchange listing; these firms tend to list in the U.S. as non-exchange issues. Here, I examine whether the continuing attractiveness of, and the tendency of firms to choose a Level 1/144a listing is value enhancing. My results suggest that the tendency on the part of firms from low-disclosure regimes to choose non-exchange issues is justified. Relative to their high-disclosure peers, these firms tend to gain most from trading in the U.S. However, for Rule 144a issues, the valuation gains are short-lived.
Keywords: Cross listing, Level 1, Rule 144a, Tobin’s q
JEL Classification: G15, G34, G35
Suggested Citation: Suggested Citation