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Market segmentation and equity valuation: Comparing Canada and the United States

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  • King, Michael R.
  • Segal, Dan

Abstract

We confirm that Canadian and U.S. equity markets remain segmented and find no evidence that integration is increasing over time. We establish this result by comparing the valuation multiples assigned to the equity of Canadian firms listed exclusively in the home market with a matched sample of U.S. firms over the period 1989-2004. Canadian firms have lower valuations based on multiples of market-to-book, price-to-last 12-month earnings, Tobin's q, and enterprise value-to-EBITDA, despite exhibiting higher sales growth and profitability. Consistent with market segmentation, this Canadian discount is reduced when Canadian firms cross-list on a U.S. stock exchange.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 18 (2008)
Issue (Month): 3 (July)
Pages: 245-258

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Handle: RePEc:eee:intfin:v:18:y:2008:i:3:p:245-258

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Citations

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Cited by:
  1. David Fielding, 2011. "New Zealand: The Last Bastion of Textbook Open-Economy Macroeconomics," Working Papers 1105, University of Otago, Department of Economics, revised Jun 2011.
  2. Randall Morck & Bernard Yeung, 2009. "Never Waste a Good Crisis: An Historical Perspective on Comparative Corporate Governance," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 145-179, November.
  3. Bianconi, Marcelo & Tan, Liang, 2010. "Cross-listing premium in the US and the UK destination," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 244-259, April.
  4. Al-Shboul, Mohammad & Anwar, Sajid, 2014. "Pricing of the currency risk in the Canadian equity market," Research in International Business and Finance, Elsevier, vol. 30(C), pages 173-194.
  5. Salaber, Julie, 2013. "Religion and returns in Europe," European Journal of Political Economy, Elsevier, vol. 32(C), pages 149-160.
  6. Fedorova, Elena & Vaihekoski, Mika, 2008. "Global and local sources of risk in Eastern European emerging stock markets," BOFIT Discussion Papers 27/2008, Bank of Finland, Institute for Economies in Transition.
  7. Pui Sun Tam & Pui I Tam, 2012. "Rethinking stock market integration: Globalization, valuation and convergence," SFB 649 Discussion Papers SFB649DP2012-052, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  8. Silvestre, Bruno & Hall, Jeremy & Matos, Stelvia & Figueira, Luiz Augusto, 2010. "Privatization of electricity distribution in the Northeast of Brazil: The good, the bad, the ugly or the naïve?," Energy Policy, Elsevier, vol. 38(11), pages 7001-7013, November.

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