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The Dark Side of International Cross-Listing: Effects on Rival Firms at Home

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  • Michael Melvin
  • Magali Valero

Abstract

"We analyse the stock price impact of firms' US cross-listing on home-market rival firms. Using an empirical event study approach we find negative cumulative average abnormal returns for the rival firms around both the listing and announcement of listing dates. The evidence suggests both positive and negative spillover effects on rival firms, where the dominant effect is that investors see rivals at a relative disadvantage to the cross-listing firm. As firms cross-list in the US and commit to the increased disclosure and investor protection associated with the US listing, they are better able to take advantage of growth opportunities relative to their non cross-listing counterparts, and this results in negative spillover effects on rival firms. Our results are consistent with the idea that firms cross-list as a means to reduce agency costs of controlling shareholders and thus are able to exploit growth opportunities as they have better access to external finance." Copyright (c) 2008 The Authors Journal compilation (c) 2008 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by European Financial Management Association in its journal European Financial Management.

Volume (Year): 15 (2009)
Issue (Month): 1 ()
Pages: 66-91

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Handle: RePEc:bla:eufman:v:15:y:2009:i:1:p:66-91

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  1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  2. Lopez-de-Silanes, Florencio & Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei, 2008. "The Law and Economics of Self-dealing," Scholarly Articles 2907526, Harvard University Department of Economics.
  3. Marco Pagano & Ailsa A. Roell & Joseph Zechner, 1999. "The Geography of Equity Listing; Why Do Companies List Abroad?," CSEF Working Papers 28, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Sep 2001.
  4. Chemmanur, Thomas J. & Fulghieri, Paolo, 2006. "Competition and cooperation among exchanges: A theory of cross-listing and endogenous listing standards," Journal of Financial Economics, Elsevier, vol. 82(2), pages 455-489, November.
  5. Alexander, Gordon J & Eun, Cheol S & Janakiramanan, S, 1987. " Asset Pricing and Dual Listing on Foreign Capital Markets: A Note," Journal of Finance, American Finance Association, vol. 42(1), pages 151-58, March.
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Cited by:
  1. Wölfle, Marco, 2007. "Price Discovery for Cross-Listed Securities from Emerging Eastern European Countries," ZEW Discussion Papers 07-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Eichler, Stefan, 2011. "Exchange rate expectations and the pricing of Chinese cross-listed stocks," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 443-455, February.

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