Corporate Governance in a Viable Market for Secondary Listings

CBC RPS No. 0025

University of Pennsylvania Journal of Business and Employment Law, Vol. 10, 2007

137 Pages Posted: 26 Feb 2007 Last revised: 3 Dec 2007

See all articles by Tobias H. Troeger

Tobias H. Troeger

Leibniz Institute for Financial Research SAFE; European Corporate Governance Institute (ECGI); European Banking Institute


The legal-bonding hypothesis explains international cross-listings with issuers' desire to lower their cost of capital by submitting to superior corporate governance institutions. This paper argues that the existence of precisely metered bonding-premiums with regard to relatively similarly developed corporate governance and disclosure regimes is doubtful. Investors are willing to accept a band of alternative institutional arrangements without charging significantly higher risk-premiums. Yet, the recent success of the London Stock Exchange in attracting foreign issuers does not indicate that its legal regime falls within this band. Although the regulatory environment allows issuers to submit to comparably stringent standards of investor protection with regard to black letter law, significantly lower enforcement levels account for measurable differences in bonding premiums. Issuers seeking cross-listings in London pursue different goals compared to their counterparts that are attracted by New York's exchanges. Hence, the City's success represents evidence for an occurring separating equilibrium in the global market for international cross-listings.

Keywords: Cross-Listing, Investor Protection, Corporate Governance, Securities Regula-tion, Legal-Bonding Hypothesis, Private Benefits, London Stock Exchange, Alternative Investment Market (AIM), Sarbanes Oxley Act

JEL Classification: G15, G32, G38, K22

Suggested Citation

Tröger, Tobias Hans, Corporate Governance in a Viable Market for Secondary Listings. CBC RPS No. 0025, University of Pennsylvania Journal of Business and Employment Law, Vol. 10, 2007, Available at SSRN:

Tobias Hans Tröger (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)


European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels


European Banking Institute ( email )


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