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Does cross-listing in the US mitigate stock crash risk? International evidence

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  • Ghadhab, Imen

Abstract

This paper investigates the role of US cross-listing in mitigating stock crash risk. By using an appropriate approach dealing with the endogeneity of the cross-listing decision, we find that cross-listing mitigates crash risk. By disentangling the effect of cross-listing from either increased disclosure/investor protection rules or reduced market segmentation, we find that cross-listing on the OTC unregulated market play a more significant role compared to the cross-listing on the regulated exchanges. Additional analysis shows that the role of cross- listing in mitigating crash risk is more important when local governance and disclosure standards are low. The results support the notion that the mitigating role of cross-listing is not driven by the commitment to high legal and disclosure environment in the US exchanges. Furthermore, results are robust after controlling for several factors identified by earlier literature as determinants of stock crash risk.

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  • Ghadhab, Imen, 2019. "Does cross-listing in the US mitigate stock crash risk? International evidence," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 186-197.
    • Handle: RePEc:eee:finana:v:63:y:2019:i:c:p:186-197
    DOI: 10.1016/j.irfa.2019.04.007
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    2. Shahab, Yasir & Ntim, Collins G. & Ullah, Farid & Yugang, Chen & Ye, Zhiwei, 2020. "CEO power and stock price crash risk in China: Do female directors' critical mass and ownership structure matter?," International Review of Financial Analysis, Elsevier, vol. 68(C).
    3. Cao, Jiahui & Wen, Fenghua & Zhang, Yue & Yin, Zhujia & Zhang, Yun, 2022. "Idiosyncratic volatility and stock price crash risk: Evidence from china," Finance Research Letters, Elsevier, vol. 44(C).
    4. Loureiro, Gilberto & Silva, Sónia, 2022. "Earnings management and stock price crashes post U.S. cross-delistings," International Review of Financial Analysis, Elsevier, vol. 82(C).
    5. Erragragui, Elias & Peillex, Jonathan & Benlemlih, Mohammed & Bitar, Mohammad, 2023. "Stock market reactions to corporate misconduct: The moderating role of legal origin," Economic Modelling, Elsevier, vol. 121(C).
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    8. Ghadhab, Imen & Nizar, Hamza & Benkraiem, Ramzi & Lakhal, Faten, 2023. "Cross-listing dynamics and labor investment efficiency: International evidence," International Review of Financial Analysis, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Cross-listing; Stock crash; Legal bonding; Information disclosure;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance

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