Do U.S. Analysts Improve the Local Information Environment of Cross-Listed Stocks?

55 Pages Posted: 27 Jun 2016 Last revised: 16 Nov 2022

See all articles by Amir Amel-Zadeh

Amir Amel-Zadeh

University of Oxford - Said Business School

Antonio Carlo Francesco Della Bina

University of Bologna - Department of Management

Date Written: November 11, 2022

Abstract

This paper examines whether and how U.S. analysts contribute to an improvement in the home market information environment of foreign firms cross-listed in the United States. Comparing abnormal return reactions to U.S. analyst recommendation revisions to local analysts’ for cross-listed stocks from 40 countries, we find strong evidence of a U.S. analyst location premium. We strengthen the identification of this effect by examining a subsample of analysts that move locations allowing us to isolate the effect of the location from unobserved differences in analyst, broker and firm characteristics. The U.S.-location premium to information production cannot be explained by a bonding or certification role of U.S. analyst, by higher U.S. investor demand for U.S. analyst services, timing differences in recommendation issuance or differences in skill. Instead, we find evidence that U.S. analysts have an advantage in interpreting financial information of cross-listed firms whose reporting is closer to U.S.-GAAP and of those that provide U.S.-GAAP reconciliations. The premium seems to disappear once cross-listed firms adopt IFRS.

Keywords: International cross-listing; analyst recommendations; location advantage; GAAP differences; IFRS; bonding hypothesis

JEL Classification: G14, G15, G24, G29, M40, O16

Suggested Citation

Amel-Zadeh, Amir and Della Bina, Antonio Carlo Francesco, Do U.S. Analysts Improve the Local Information Environment of Cross-Listed Stocks? (November 11, 2022). Available at SSRN: https://ssrn.com/abstract=2801109 or http://dx.doi.org/10.2139/ssrn.2801109

Amir Amel-Zadeh (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Antonio Carlo Francesco Della Bina

University of Bologna - Department of Management ( email )

Piazza Scaravilli 1
Bologna, Bologna 40126
Italy

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