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Cross-listing and subsequent delisting in foreign markets

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  • You, Leyuan
  • Parhizgari, Ali M.
  • Srivastava, Suresh
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    Abstract

    Employing a sample of stocks cross-listed and subsequently delisted from foreign markets, we examine the consequences of delisting to investors in terms of price, risk, and liquidity. We also provide a direct comparison between the firm's performance after a foreign cross-listing and after its subsequent delisting. We find a positive cross-listing and negative delisting effect on stock price, both of which dissipate in the long run. No significant changes in the market risk are found for either event. Foreign cross-listing and delisting are associated with increasing and decreasing long term trading volume respectively. Further analysis reveals that firms delist in response to low host market return and low firm trading volume in the host market. The changes in liquidity and market risk from delisting relate those from cross-listing. Finally, our results show that the bonding hypothesis fails to explain the listing premium and the delisting loss.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Empirical Finance.

    Volume (Year): 19 (2012)
    Issue (Month): 2 ()
    Pages: 200-216

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    Handle: RePEc:eee:empfin:v:19:y:2012:i:2:p:200-216

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    Web page: http://www.elsevier.com/locate/jempfin

    Related research

    Keywords: Foreign listing; Foreign delisting; Event study; Bonding hypothesis;

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    References

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    Cited by:
    1. Roger Su & Ronghua Yi & Keith Hooper & Amitabh Dutta, 2013. "Information Spillover, Profit Opportunities, and Return Deviations Analysis: The Case of Cross-Listed BHP Billiton," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 12(2), pages 155-170, December.
    2. Karolyi, G. Andrew, 2012. "Corporate governance, agency problems and international cross-listings: A defense of the bonding hypothesis," Emerging Markets Review, Elsevier, vol. 13(4), pages 516-547.

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