Where is the Market? Evidence from Cross-Listings
29 Pages Posted: 23 Jun 2004
Date Written: March 15, 2004
We investigate the distribution of trading volume across different venues after a company lists abroad. In most cases, after an initial blip, foreign trading declines rapidly to extremely low levels. However, there is considerable cross-sectional variation in the persistence and magnitude of foreign trading. The ratio between foreign and domestic trading volume is higher for smaller, more export and high-tech oriented companies. It is also higher for companies that cross-list on markets with lower trading costs and better insider trading protection. Domestic trading increases around the cross-listing, and afterwards is negatively correlated with past foreign trading activity. This accords with the flow-back hypothesis that declining foreign trading is associated with the gravitational pull of the home market.
Keywords: trading volume, cross-listing, flow-back
JEL Classification: G15, G30
Suggested Citation: Suggested Citation