Would Improved Information Environment of a Less Regulated OTC Market Benefit Blue-chip Foreign Firms? Evidence from the OTCQX International Market

58 Pages Posted: 24 Mar 2021

See all articles by Martin Kim

Martin Kim

Saint Joseph's University

Steve Lin

University of Memphis

Liu Yang

Southeast Missouri State University; University of Miami - Department of Accounting

Date Written: November 30, 2020

Abstract

This study examines whether improved information environment in the OTCQX International market (hereafter QX market) benefits blue-chip foreign private issuers (FPIs). We find that around 600 FPIs traded their stocks in the QX market during 2007-2016, and they are financially better than their home-country counterparts. We also find approximately 6% abnormal return around the cross-listing days. Moreover, FPIs with higher financial reporting transparency (i.e., lower earnings smoothness and preparing financial statements in accordance with International Financial Reporting Standards) experience more pronounced abnormal returns and liquidity improvement around the cross-listing days. Further analysis shows that market premium of cross listing on the QX market is not attributed to the bonding effect. Our results highlight the importance of information environment of a less regulated OTC market in benefiting large and established FPIs, which should be of interest to market regulators, investors, and foreign firms that intend to access less regulated U.S. markets.

Keywords: OTC; OTCQX; Cross-listing; Foreign Private Issuers; Earnings Transparency; IFRS

JEL Classification: G14;G15;M41

Suggested Citation

Kim, Martin and Lin, Steve and Yang, Liu, Would Improved Information Environment of a Less Regulated OTC Market Benefit Blue-chip Foreign Firms? Evidence from the OTCQX International Market (November 30, 2020). Available at SSRN: https://ssrn.com/abstract=3811044

Martin Kim

Saint Joseph's University ( email )

5600 City Ave
Philadelphia, PA 19131

Steve Lin

University of Memphis ( email )

Memphis, TN 38152
Memphis, TN usa 38152-3370
United States
38152 (Fax)

Liu Yang (Contact Author)

Southeast Missouri State University ( email )

1 University Plaza
Cape Girardeau, MO MO 63701
United States

University of Miami - Department of Accounting ( email )

Coral Gables, FL 33146-6531
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
15
Abstract Views
56
PlumX Metrics