The Value of Information in Cross-Listing
32 Pages Posted: 16 Mar 2007 Last revised: 31 Oct 2011
Date Written: September 1, 2009
We exploit a unique feature of the organizational structure of the London Stock Exchange that allows for direct tests of the market segmentation and liquidity hypotheses against the information based hypotheses of cross-listing. We identify a sample of international firms that are admitted to trading on London's SEAQ-I platform without their involvement. We estimate the valuation effects of this multi-market trading event and compare them to those enjoyed by firms that pursue a London Stock Exchange cross-listing. A cross-sectional abnormal returns analysis documents strong evidence in support of significant information driven valuation benefits and limited support for the effects of market segmentation and liquidity. An analysis of the firms' home market price volatility corroborates the results.
Keywords: International Finance, Cross-Listing, Information
JEL Classification: G15
Suggested Citation: Suggested Citation