International Cross-Listing and Shareholders’ Wealth

Abstract

This study evaluates the relationship between international cross-listings and shareholders' wealth across different host markets and across time. For a sample of cross-listings by European companies in the US, in the UK, and within Europe, the findings show that US and UK cross-listings, on average, result in positive cumulative abnormal returns around the announcement of cross-listing. No such evidence exists for the rest of European cross-listings. In addition, the Sarbanes-Oxley Act (SOX) of 2002 affects negatively the wealth benefits of US cross-listings, while wealth creation around UK cross-listings is primarily concentrated in Alternative Investment Market listings rather than Main Market listings. There is no evidence that the introduction of the Euro affects the wealth effects of cross-listings within the Eurozone. Finally, this study provides evidence on the relative importance of alternative theories on the wealth effects of cross-listing, including market segmentation, legal bonding, liquidity, investor recognition, proximity preference, market timing and business strategy theories, after considering the effect of the introduction of the Euro and the adoption of SOX. The results show that significance of the alternative theories varies across host markets and over time.

Why Do Canadian Firms Cross‐list? The Flip Side of the Issue

“…In a similar vein, we suggest that managerial incentives may relate to the decision to cross-list. In particular, prior studies show evidence that cross-listing may improve both the magnitude of growth opportunities and the ability of the firm to exploit future growth opportunities (Miller, 1999;Baker et al, 2002;Pagano et al, 2002;Doidge et al, 2004;Dodd and Louca, 2012). Further, cross-listing enhances the information environment of the firm and reduces the firm cost of equity capital (Coffee, 2002;Lang et al, 2003;Hail and Leuz, 2009;King and Segal, 2009).…”

Why do firms cross‐list their shares on foreign exchanges? A review of cross‐listing theories and empirical evidence

“…More recently, Roosenboom and van Dijk (2009) and Dodd and Louca (2012) compare the stock price reaction to cross‐listing on major stock exchanges and report that abnormal returns around the announcement of cross‐listing are highest for US listings, followed by UK listings. In addition, the former report that foreign listings in Japan have no significant impact on shareholders’ wealth while the latter find no evidence that cross‐listings within continental Europe have significant valuation effects, which could indicate that European financial markets are fully integrated.…”

“…In addition, the former report that foreign listings in Japan have no significant impact on shareholders’ wealth while the latter find no evidence that cross‐listings within continental Europe have significant valuation effects, which could indicate that European financial markets are fully integrated. Dodd and Louca (2012) also report that the introduction of the euro, a single European currency, which further increased the level of financial integration in this region, has had no impact on the effects of cross‐listings within the eurozone. Furthermore, Roosenboom and van Dijk (2009) and Dodd and Louca (2012) test whether the degree of market segmentation can explain the cross‐sectional variation of abnormal returns around the announcement of cross‐listing.…”

“…Dodd and Louca (2012) also report that the introduction of the euro, a single European currency, which further increased the level of financial integration in this region, has had no impact on the effects of cross‐listings within the eurozone. Furthermore, Roosenboom and van Dijk (2009) and Dodd and Louca (2012) test whether the degree of market segmentation can explain the cross‐sectional variation of abnormal returns around the announcement of cross‐listing. The former study reports that this relationship is significant only for British cross‐listings – the latter only for US cross‐listings.…”

Competitive Advantages and Performance of Stock Market: The Case of Egypt

“…Result indicate that GDR listings adversely affects the returns, ADR listings do not seem to have any significant impact on the returns available from the underlying domestic shares. Dodd & Louca (2012) evaluates the relationship between international cross-listings and shareholders' wealth across different host markets and across time. For a sample of cross-listings by European companies in the US, in the UK, and within Europe, the findings show that US and UK cross-listings, on average, result in positive cumulative abnormal returns around the announcement of cross-listing.…”