International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market

Abstract

Policy makers in emerging markets are increasingly concerned about the consequences for the domestic equity market when a company lists its stock abroad. We show that the effects of cross-listing depends on market transparency, i.e., the quality of inter-market information linkages. We investigate these issues with unique data from the Mexican equity market. The impact of cross-listing is complex, balancing the costs of order flow migration against the benefits of increased inter-market competition. These effects are exacerbated by equity investment barriers that induce segmentation of the domestic equity market. Consequently, the benefits and costs of cross-listing are not evenly spread over all classes of shareholders.

JEL Classification: F02, N26