The Nature of the Foreign Listing Premium: A Cross-Country Examination

Abstract

An expanding literature asserts that non-U.S. firms achieve a unique valuation premium for listing on U.S. equity markets. In this paper we test the uniqueness of the U.S. foreign listing premium by examining the premium achieved by foreign listings across a global set of stock exchanges. We highlight that the documented valuation premium for listing on U.S. exchanges is not unique but common to many home and host markets including U.S. firms that list abroad. The cross-sectional variation in the valuation premium appears to have little association with such cross-country institutional features as investor protection rules or accounting disclosure standards. Rather the premium appears most related to variation in pre-listing valuation ratios.

Keywords: Cross listings, Firm valuation, Rule of law, Stock exchanges, Tobin’s Q

JEL Classification: G15, G32