Discussion of ADRs, Analysts, and Accuracy: Does Cross Listing in the U.S. Improve a Firm's Information Environment and Increase Market Value?
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network
Lang, Lins and Miller (2002) investigate the relation between cross listing in the U.S. and information intermediation by analysts. The results suggest that cross listing in the U.S. increases analyst following and forecast accuracy and that both variables are associated with Tobin's Q. These findings are interesting and advance the cross-listing literature in several ways. This discussion raises two issues. First, I highlight that the sources of cross-listing effects are not obvious and are difficult to disentangle. To illustrate this point, I replicate the analysis using cross-listed Canadian firms, for which mandated disclosures are held constant. Thus, if disclosure effects are important for documented cross-listing effects, I expect to find no relation in the Canadian sample. The findings for forecast accuracy are consistent with this hypothesis. However, analyst following continues to be significantly higher for cross-listed Canadian firms. These findings suggest that the sources of cross-listing effects differ for analyst coverage and forecast accuracy. Second, I discuss the link between analyst variables, firm value and cost of capital. As they are only tenuously related, I draw attention to some unresolved questions and areas for future research.
Number of Pages in PDF File: 24
Keywords: analyst forecasts, cross listing, cost of capital, disclosure, enforcement
JEL Classification: G29, M41, M45
Date posted: January 20, 2003