The Listing and Delisting of German Firms on NYSE and NASDAQ: Were There Any Benefits?

Abstract

We examine the NYSE and NASDAQ listing and delisting decisions of German companies in the context of the market segmentation and bonding theories. Both theories explicitly or implicitly assume that cross listing resulted in lower costs of capital and higher market valuations for the firms. However, using the same or similar research methods employed by those who have investigated and tested these theories, we find no systemic evidence that the German companies experienced reductions in their cost of capital or increases in their market values as a result of the cross listings. Our overall conclusion is that no significant valuation benefits were associated with the cross listings and that once Rule 12h-6 was adopted that enabled firms to delist without continuing to be subject to SEC regulations, many did so. Contributing to these decisions were changes in German corporate governance laws and the emergence of alternative trading platforms.

Keywords: Cross Listing, Delisting, Market Segmentation, Bonding Theories

JEL Classification: G15, G18, G30