The Value of Excess Cash and Corporate Governance: Evidence from U.S. Cross-listings

55 Pages Posted: 22 Jan 2007 Last revised: 10 Jun 2009

See all articles by Laurent Frésard

Laurent Frésard

University of Lugano; Swiss Finance Institute

Carolina Salva

University of Neuchatel

Date Written: June 1, 2009


We examine whether and how a U.S. cross-listing mitigates the risk that insiders will turn their firm’s cash holdings into private benefits. We find strong evidence that the value investors attach to excess cash reserves is substantially larger for foreign firms listed on U.S. exchanges and over the counter than for their domestic peers. Further, we show that this excess-cash premium stems not only from the strength of U.S. legal rules and disclosure requirements, but also from the greater informal monitoring pressure that accompanies a U.S. listing. Overall, since investors’ valuation of excess cash mirrors how they expect the cash to be used, our analysis shows that a U.S. listing constrains insiders’ inefficient allocation of corporate cash reserves significantly.

Keywords: International cross-listing, corporate governance, cash holdings, liquidity

JEL Classification: G15, G34, G31

Suggested Citation

Frésard, Laurent and Salva, Carolina, The Value of Excess Cash and Corporate Governance: Evidence from U.S. Cross-listings (June 1, 2009). EFA 2007 Ljubljana Meetings Paper, Available at SSRN:

Laurent Frésard

University of Lugano ( email )

Lugano, 900

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Carolina Salva (Contact Author)

University of Neuchatel ( email )

AL Breguet 2
CH-2000 Neuchatel

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