The value of information in cross-listing
Abstract
Until 2004, the London Stock Exchange allowed firms to be traded in the specialized SEAQ-I platform without the firm's involvement. Trading only required an application by one LSE trading member firm. Such an institutional arrangement, which made cross-listings possible without a firms' approval, allows for a direct test of different theories of foreign listing. In particular, we can differentiate between market segmentation and liquidity hypotheses, which rely on a firm trading in a foreign exchange and informational hypotheses, which assume that a firm makes the decision to trade in a foreign exchange. 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 standard London Stock Exchange cross-listing. A cross-sectional abnormal returns analysis documents significant evidence in support of information-related hypotheses of cross-listing. An analysis of the firms' home market price volatility corroborates the results.Download Info
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Bibliographic Info
Article provided by Elsevier in its journal Journal of Corporate Finance.
Volume (Year): 18 (2012)
Issue (Month): 2 ()
Pages: 207-220
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Web page: http://www.elsevier.com/locate/jcorpfin
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Keywords: Cross-listing; Information; Signaling; Liquidity; Segmentation;References
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