Private Benefits of Control, Ownership, and the Cross-Listing Decision

ECGI - Finance Working Paper No. 77/2005

Dice Center Working Paper No. 2005-2

49 Pages Posted: 16 Mar 2005

See all articles by Craig Doidge

Craig Doidge

University of Toronto - Rotman School of Management

George Andrew Karolyi

Cornell University - Samuel Curtis Johnson Graduate School of Management

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Karl V. Lins

University of Utah - Department of Finance

Darius P. Miller

Southern Methodist University (SMU) - Finance Department

Multiple version iconThere are 2 versions of this paper

Date Written: April 2006

Abstract

This paper investigates how a foreign firm's decision to cross-list on a U.S. stock exchange is related to the consumption of private benefits of control by its controlling shareholders. Theory has proposed that when private benefits are high, controlling shareholders are less likely to choose to list their firm's shares in the U.S. because the higher standards for transparency and disclosure, as well as the increased monitoring associated with such listings, limit their ability to extract private benefits. Using ownership of control rights by the firm's controlling shareholder as a proxy for private benefits, we offer evidence that confirms this hypothesis with a sample of more than 4,000 firms from 31 countries. In particular, the probability that a firm will cross-list on a U.S. exchange is inversely related to the control rights held by the controlling shareholder and to the difference between the control rights and the cash flow rights owned by the controlling shareholder.

Keywords: Private benefits of control, corporate governance, cross-listing, corporate ownership

JEL Classification: G15, G34, K00, P51, F30

Suggested Citation

Doidge, Craig and Karolyi, George Andrew and Stulz, Rene M. and Lins, Karl V. and Miller, Darius P., Private Benefits of Control, Ownership, and the Cross-Listing Decision (April 2006). ECGI - Finance Working Paper No. 77/2005; Dice Center Working Paper No. 2005-2. Available at SSRN: https://ssrn.com/abstract=668424 or http://dx.doi.org/10.2139/ssrn.668424

Craig Doidge

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-8598 (Phone)

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Doidge

George Andrew Karolyi

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Karl V. Lins

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-3171 (Phone)
801-581-7214 (Fax)

Darius P. Miller

Southern Methodist University (SMU) - Finance Department ( email )

United States

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