Valuation Effects of Termination of Cross-Listings

22 Pages Posted: 29 Nov 2017 Last revised: 26 Feb 2023

See all articles by Roland Füss

Roland Füss

Swiss Finance Institute; University of St. Gallen - School of Finance

Ulrich Hommel

EBS Business School

Jan Plagge

Independent

Date Written: March 27, 2014

Abstract

In the past, segmentation of capital markets incentivized numerous companies to cross-list in more integrated markets by promising better investor recognition and thereby lowering cost of capital and increasing stock liquidity. In recent years, however, more and more companies have decided to terminate these dual listings. In contrast to previous studies, which mainly focus on the benefits and/or drawbacks of the initial cross-listings, this paper investigates share price effects linked to the termination of cross-listings. A special focus lies on the characteristics of companies’ home markets to explain observed price effects. The empirical results show negative abnormal returns on the event date as well as negative cumulative abnormal returns in the weeks following the announcement of the termination of the secondary listing. The absolute value of the price reaction varies positively with foreign investors’ difficulty to enter the companies’ local market and the fraction of liquidity allocated to the foreign listing prior to the delisting event.

Suggested Citation

Füss, Roland and Hommel, Ulrich and Plagge, Jan, Valuation Effects of Termination of Cross-Listings (March 27, 2014). Journal of Financial Perspectives, Vol. 2, No. 1, 2014, Available at SSRN: https://ssrn.com/abstract=3078122

Roland Füss (Contact Author)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Ulrich Hommel

EBS Business School ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, 65189
Germany
+49 611 7102 1241 (Phone)
+49 611 7102 10 1241 (Fax)

Jan Plagge

Independent ( email )

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