Cross-listings, Antitakeover Defenses, and the Insulation Hypothesis

39 Pages Posted: 23 May 2021 Last revised: 12 Jun 2021

See all articles by Albert Tsang

Albert Tsang

Hong Kong Polytechnic University

Nan Yang

Hong Kong Polytechnic University - School of Accounting and Finance

Lingyi Zheng

The Hong Kong Polytechnic University

Date Written: May 18, 2021

Abstract

This paper tests a theory conjecturing that cross-listing can insulate firms from potential hostile takeovers owing to the increased cost concern of bidders. We find a significant and positive relation between the corporate control threat and the likelihood that firms cross-list in a foreign country. Firms facing takeover threats are more likely to choose hosting countries with greater accounting differences from the U.S. GAAP. Subsample evidence suggests that cross-listing is more likely to be used as an antitakeover device if firms have foreign market exposure or when all-cash offers are less likely. Tests based on quasi-natural experiments provide further support.

Keywords: Cross-listing, Takeover deterrent, Poison pills

JEL Classification: G15, G34, G38, K22

Suggested Citation

Tsang, Albert and Yang, Nan and Zheng, Lingyi, Cross-listings, Antitakeover Defenses, and the Insulation Hypothesis (May 18, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3848755 or http://dx.doi.org/10.2139/ssrn.3848755

Albert Tsang (Contact Author)

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Nan Yang

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

Lingyi Zheng

The Hong Kong Polytechnic University ( email )

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