Global Liquidity Provision and Risk Sharing
64 Pages Posted: 22 Jan 2015 Last revised: 14 Jan 2019
Date Written: July 1, 2015
Using a sample of U.S. firms traded in 20 countries, we show that liquidity sensitivity to market declines is significantly lower among cross-listed firms than only U.S.-listed companies. This result is stronger when firms are listed on multiple exchanges, in larger and more liquid markets. The liquidity enhancement is associated with firms’ increased global ownership post-listing and is particularly effective for firms with high volatility, foreign income, foreign trading, and probability of informed trading. Cross-listed firms show lower liquidity betas and suffer less from transitory price shocks. Our findings highlight global market importance for supplying liquidity and reducing liquidity risk.
Keywords: Foreign holdings; Funding liquidity; Market segmentation; S&P 500 index
JEL Classification: G11, G14, G15
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