The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation
41 Pages Posted: 17 Aug 2006
Date Written: October 1, 2006
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: Suggested Citation