Cross-listing effect on information environment of foreign firms: ADR type and country characteristics

How Are Foreign Firms Valued in U.S. Markets? Evidence from Firm and Country Characteristics

“…For U.S. cross-listing studies, Eleswarapu and Venkataraman (2006) analyze how home countries' institutions influence cross-listing firms' trading costs. Lee and Valero (2010) investigate the effect of cross-listing on foreign firms' information environment. They argue that the effect depends on firms' listing types and home countries' characteristics.…”

Foreign cultures, Sarbanes–Oxley Act and cross-delisting

“…There was a large number of cross-listed firms in the 1990s and early 2000 and there is extensive literature on the benefits for non-U.S. firms to cross-list shares in the U.S. -firms gain access to more developed capital markets, increased transparency (Foerster and Karolyi, 1999;Doidge et al, 2009b;Gozzi et al, 2008;Lel and Miller, 2008). Lee and Valero (2010) show the increase in the intensity of analyst coverage of ADR programs and this coverage is strongly pronounced for exchange listed ADRs.…”

“…Typically, firms from countries with weak investor protection cross-list on markets with stronger protection (Abdallah and Goergen, 2008). Similarly, Lee and Valero (2010) show the increase in analyst coverage for ADR programs is mostly for firms from countries with greater information asymmetry and weaker legal traditions. With crosslisting foreign firms can "leapfrog" their country's weak legal institutions by listing equity in the U.S. and voluntarily abiding by U.S. security laws (Siegel, 2005).…”

“…Cross-listing behavior of foreign firms has been studied in both the finance and legal literature. Existing research in finance has identified reasons for cross-listing in the United States ranging from greater liquidity, enhanced capital access, increased transparency (Foerster and Karolyi, 1999;Miller, 1999;Doidge, 2004;Doidge et al, 2009bDoidge et al, , 2004Gozzi et al, 2008;Lel and Miller, 2008), to increased visibility and prestige (Fernandez and Ferreira, 2008;Lee and Valero, 2010) among others. The legal literature also offers an explanation; by cross-listing shares in the U.S. foreign firms bond themselves with a stronger legal system which offers better investor protection and leads to increased reputation and higher investor confidence (Coffee, 2002(Coffee, , 1999Abdallah and Goergen, 2008).…”

Alternative paths of convergence toward U.S. market and legal regulations: Cross-listing vs. merging with U.S. bidders

“…Doidge, 2004;Doidge et al, 2009bDoidge et al, , 2004 and facilitating monitoring (Lel and Miller, 2008). Cross-listing also leads to easier access to developed U.S. capital markets (Lins et al, 2005), greater visibility and added analyst coverage (Lee and Valero, 2010;Fernandez and Ferreira, 2008;Baker et al, 2002), more transparent and informative disclosure (Bailey et al, 2006;Lang et al, 2003a), as well as increased shareholder base and risk sharing due to market segmentation (Gozzi et al, 2008;Bris et al, 2007;Foerster and Karolyi, 1999). On the other hand, cross-listings are associated with compliance costs and exchange-listing expenditures.…”