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Protection of Minority Shareholder Interests, Cross-listings in the United States, and Subsequent Equity Offerings

36 Pages Posted: 14 Feb 2000  

William A. Reese Jr.

Tulane University - A.B. Freeman School of Business

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 17, 1999

Abstract

This paper examines the view that non-U.S. firms cross-list in the United States to increase protection of their minority shareholders. We find that firms from French Civil Law countries, which have relatively weak protections for minority shareholders, are more likely to cross-list on an organized exchange than firms from English Common Law countries. Since listing on an organized exchange subjects the firm to U.S. securities law and requires the firm to conform to U.S. GAAP while listing a firm OTC or 144a does not, this finding is consistent with the view that firms from French Civil Law countries attempt to protect their minority shareholders by cross-listing. Subsequent to cross-listing in the U.S., equity offerings increase from firms from all countries, with larger post-cross-listing offerings from countries with lower shareholder protections. Equity offerings increase both in the U.S. and outside the U.S. Finally there is an association between shareholder protection in the home country and the location (U.S. or non-U.S.) of the equity offering, with non-U.S. offering more likely from countries with few shareholder protections. Overall, the pattern of cross-listing and equity offerings we observe in this paper suggests that bonding occurs when we expect it to be important, and that a significant reason for cross-listing in the U.S. is the legal protections of U.S. securities laws that are associated with the cross-listing.

JEL Classification: G15, G30, K22, M41

Suggested Citation

Reese Jr., William A. and Weisbach, Michael S., Protection of Minority Shareholder Interests, Cross-listings in the United States, and Subsequent Equity Offerings (November 17, 1999). Available at SSRN: https://ssrn.com/abstract=194670 or http://dx.doi.org/10.2139/ssrn.194670

William A. Reese

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States
504-865-5465 (Phone)
504-865-6751 (Fax)

Michael S. Weisbach (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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