The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation

41 Pages Posted: 17 Aug 2006

See all articles by Michael R. King

Michael R. King

Gustavson School Of Business

Dan Segal

Interdisciplinary Center (IDC) Herzliyah

Date Written: October 1, 2006

Abstract

The widening of a foreign firm's U.S. investor base and the improved information environment associated with cross-listing on a U.S. exchange are distinct effects. Valuations of Canadian firms peak in the year of cross-listing and fall monotonically thereafter, irregardless of the level of U.S. investor holdings or the ownership structure of the firm. Cross-listed firms with a 20%+ blockholder attract a similar number of U.S. institutional investors as widely-held firms on average, but experience a lower increase in valuation at high levels of investor recognition. While U.S. investors are less willing to invest in firms with dual-class shares, these firms benefit more from cross-listing even when they fail to widen their U.S. investor base, suggesting that the reduction in information asymmetry between controlling and minority investors has a separate impact on valuation for firms where agency problems are greatest.

Keywords: equity valuation, international cross-listing, investor recognition, institutional investors, ownership structure

JEL Classification: G12, G15

Suggested Citation

King, Michael Robert and Segal, Dan, The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation (October 1, 2006). EFA 2007 Ljubljana Meetings Paper, Available at SSRN: https://ssrn.com/abstract=924585 or http://dx.doi.org/10.2139/ssrn.924585

Michael Robert King (Contact Author)

Gustavson School Of Business ( email )

University of Victoria
Business & Economics Building, Room 246
Victoria, British Columbia V8W 2Y2
Canada
250-721-6425 (Phone)

HOME PAGE: http://https://www.uvic.ca/gustavson/faculty/faculty/faculty/current/kingm.php

Dan Segal

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

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