A Breakdown of the Valuation Effects of International Cross-Listing

33 Pages Posted: 24 May 2007

See all articles by Arturo Bris

Arturo Bris

IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Salvatore Cantale

Tulane University - A.B. Freeman School of Business

George Nishiotis

University of Cyprus-Faculty of Economics and Management-Department of Accounting and Finance

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Abstract

It is well known that cross-listing domestic stocks in foreign exchanges has significant valuation effects on the listed company's shares. Using a sample of firms with dual shares, we explore the differential effects of cross-listing on prices and we are able to separate the different sources of the benefits of cross-listing. These sources include market segmentation, liquidity, and the bonding of controlling shareholders to lower expropriation of firm resources. Our results show that even though the market segmentation and bonding effects are both statistically significant, the economic significance of segmentation is more than double that of bonding. Furthermore, we document an economically and statistically significant increase in the liquidity of both share classes after the listing. Overall, our results explain why less and less firms are willing to list in the USA: Sarbanes Oxley has increased the cost of adopting better governance while its benefits are not substantial; and market segmentation has decreased significantly in the last years.

Suggested Citation

Bris, Arturo and Cantale, Salvatore and Nishiotis, George P., A Breakdown of the Valuation Effects of International Cross-Listing. European Financial Management, Vol. 13, No. 3, pp. 498-530, June 2007. Available at SSRN: https://ssrn.com/abstract=988212 or http://dx.doi.org/10.1111/j.1468-036X.2006.00370.x

Arturo Bris (Contact Author)

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States

Salvatore Cantale

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States
504-865-5032 (Phone)
504-865-6751 (Fax)

George P. Nishiotis

University of Cyprus-Faculty of Economics and Management-Department of Accounting and Finance ( email )

Cyprus

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