Why do Firms Cross-(de)list? An Examination of the Determinants and Effects of Cross-delisting

51 Pages Posted: 27 Feb 2006  

Jonathan L. Witmer

Bank of Canada

Date Written: November 15, 2005

Abstract

This paper examines cross-listed stocks that delist in the US. Consistent with the liquidity hypothesis and Merton's awareness hypothesis, we find that firms with a lower percentage of turnover in the US are more likely to voluntarily delist. Contrary to the predictions of the bonding hypothesis, firms are more likely to voluntarily cross-delist if they are from countries with weaker investor protection.

We find an average negative return of approximately 5% around the delisting announcement. This negative return is mitigated if the stock has a low proportion of turnover in the US, which also supports the liquidity and bonding hypotheses.

Keywords: cross-list, delisting, international finance, bonding hypothesis

JEL Classification: G14, G15

Suggested Citation

Witmer, Jonathan L., Why do Firms Cross-(de)list? An Examination of the Determinants and Effects of Cross-delisting (November 15, 2005). Available at SSRN: https://ssrn.com/abstract=885503 or http://dx.doi.org/10.2139/ssrn.885503

Jonathan L. Witmer (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada

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