Where is the Market? Evidence from Cross-Listings
34 Pages Posted: 5 Aug 2005
Date Written: April 2005
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. Foreign trading is high close to the cross-listing date but decreases dramatically in the subsequent six months. 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