Why Do Canadian Firms Cross List? The Flip Side of the Issue

Forthcoming at Abacus: A Journal of Accounting, Finance and Business Studies

Posted: 29 Apr 2008 Last revised: 10 Apr 2016

See all articles by Andreas Charitou

Andreas Charitou

University of Cyprus

Christodoulos Louca

Cyprus University of Technology

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2016

Abstract

We investigate the relation between managerial incentives and the decision to cross list by comparing Canadian firms cross listed on U.S. stock exchanges to industry- and size-matched control firms. After controlling for firm and ownership structure characteristics, we find a positive association between substantial holdings of vested options held by CEOs prior to cross listing and the decision to cross list. Further, firms managed by CEOs with substantial holdings of vested options exhibit positive announcement returns and negative post-announcement long-run returns. CEOs of cross listed firms seem to take advantage of the aforementioned market behavior, because they abnormally exercise vested options and sell the proceeds during the year of listing only when their firms underperform during the subsequent year. In addition, there is a positive relation between substantial holdings of vested options and discretionary accruals during the year of listing, consistent with the view that CEOs manage earnings to keep stock prices at high levels. Overall, these results have significant implications for the cross listing literature, suggesting an association between cross listing and CEO incentives to maximize CEO private benefits.

Keywords: cross listing, CEO compensation, vested options

JEL Classification: G15, G34, J33, M52

Suggested Citation

Charitou, Andreas and Louca, Christodoulos, Why Do Canadian Firms Cross List? The Flip Side of the Issue (April 1, 2016). Forthcoming at Abacus: A Journal of Accounting, Finance and Business Studies. Available at SSRN: https://ssrn.com/abstract=949827 or http://dx.doi.org/10.2139/ssrn.949827

Andreas Charitou

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 2 893624 (Phone)
+357 2 895030 (Fax)

Christodoulos Louca (Contact Author)

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

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