Look at Me Now: What Attracts U.S. Shareholders?

53 Pages Posted: 29 Sep 2006 Last revised: 29 Aug 2010

See all articles by John Ammer

John Ammer

U.S. Federal Reserve Board of Governors

Sara B. Holland

University of Oklahoma - Michael F. Price College of Business

David C. Smith

University of Virginia - McIntire School of Commerce

Francis E. Warnock

University of Virginia - Darden Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2006

Abstract

This paper investigates the underlying determinants of home bias using a comprehensive data set on U.S. investors' aggregate holdings of every foreign stock. Among those foreign stocks that are not listed on U.S. exchanges, which account for more than 96 percent of our usable data sample, we find that U.S. investors prefer firms with characteristics associated with greater information transparency, such as stronger home-country accounting standards. We document that a U.S. cross-listing is economically important, as U.S. ownership of a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and find that the increase in U.S. investment is greatest for firms that are from weak accounting backgrounds and are otherwise informationally opaque, suggesting that the key effect of cross-listing is improvements in disclosure that are valued by U.S. investors. By contrast, cross-listing does not increase the appeal of stocks from countries with weak shareholder rights, suggesting that U.S. cross-listing cannot substitute for legal protections in the home country. Nor does the cross-listing effect appear to be driven simply by increased "familiarity"� with the stock or lowered cross-border transactions costs.

Suggested Citation

Ammer, John Matthew and Holland, Sara B. and Smith, David Carl and Warnock, Francis E., Look at Me Now: What Attracts U.S. Shareholders? (August 2006). NBER Working Paper No. w12500. Available at SSRN: https://ssrn.com/abstract=927384

John Matthew Ammer

U.S. Federal Reserve Board of Governors ( email )

20th & C Streets NW
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Sara B. Holland

University of Oklahoma - Michael F. Price College of Business ( email )

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United States

David Carl Smith

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
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United States

Francis E. Warnock (Contact Author)

University of Virginia - Darden Business School ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-6076 (Phone)

HOME PAGE: http://faculty.darden.virginia.edu/warnockf/index.htm

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138-5398

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