On the Role of Cultural Distance in the Decision to Cross-List
48 Pages Posted: 16 Oct 2012 Last revised: 28 May 2013
Date Written: April 30, 2013
This paper examines the role of culture in the choice of the destination market for cross-listing firms. We argue that firms cross-list in markets that have greater cultural similarities since 1) investors are more willing to invest in firms with which they are culturally more familiar and 2) managers may seek to avoid potential conflicts with culturally disparate investors and managers. Employing Hofstede’s cultural dimensions, we find that firms from developed markets show a greater propensity to cross-list in a country with similar values as their home country. These results are robust to a range of alternative cultural measures, including modified Hofstede scores, societal practices scores from the Global Leadership and Organizational Behavior Effectiveness (GLOBE) project, and World Values Survey scores. In addition, we find that not all aspects of culture matter and that it is mainly the difference in uncertainty avoidance that affects cross-listing decisions.
Keywords: National culture, cultural distance, international cross-listing
JEL Classification: C24, G10
Suggested Citation: Suggested Citation