The Impact of Cross-Delisting From the U.S. on Firms’ Financial Constraints

38 Pages Posted: 16 Dec 2019

See all articles by Gilberto R. Loureiro

Gilberto R. Loureiro

University of Minho - School of Economics and Management

Sónia Silva

University of Minho - School of Economics and Management

Date Written: September 18, 2019

Abstract

We investigate the impact of cross-delisting on firms’ financial constraints. We find that firms that cross-delisted from a U.S. stock exchange face stronger post-delisting financial constraints than their cross-listed counterparts, as measured by investment-to-cash flow and cash-to-cash flow sensitivities. Following a delisting, the sensitivity of investment to cash flow increases significantly, and firms also tend to save more cash out of cash flows. These effects are mainly driven by cross-delisted firms from countries with weaker investor protection and are more predominant after the passage of Rule 12h-6 (of 2007), which made it easier for foreign firms to leave U.S. markets.

Keywords: Cross-delisting; Financial constraints; Information asymmetry; Investment-to-cash flow sensitivity; Cash-to-cash flow sensitivity

JEL Classification: F30; F31; G15; G30

Suggested Citation

Loureiro, Gilberto R. and Silva, Sónia, The Impact of Cross-Delisting From the U.S. on Firms’ Financial Constraints (September 18, 2019). Journal of Business Research (January, 2020) ,108, 132-146. Available at SSRN: https://ssrn.com/abstract=3492789

Gilberto R. Loureiro (Contact Author)

University of Minho - School of Economics and Management ( email )

Campus Gualtar
Braga, 4710-057
Portugal
+351-253-605553 (Phone)
+351-253-601380 (Fax)

Sónia Silva

University of Minho - School of Economics and Management ( email )

Campus de Gualtar
Braga, 4710
Portugal

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