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The market reaction to cross-listings: Does the destination market matter?

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Author Info

  • Roosenboom, Peter
  • van Dijk, Mathijs A.

Abstract

This paper examines (i) whether market reactions to cross-listings differ across destination markets and (ii) to what extent the following explanations for value creation around cross-listings can account for differences in market reactions across cross-listings on various destination markets: overcoming market segmentation, increased market liquidity, improved information disclosure, and better investor protection ("bonding"). We analyze 526 cross-listings from 44 different countries on eight major stock exchanges and document significant announcement returns of 1.3% on average for cross-listings on US exchanges, 1.1% on London Stock Exchange, 0.6% on exchanges in continental Europe, and 0.5% (not significant) on Tokyo Stock Exchange. We find evidence consistent with improved disclosure and bonding creating value for cross-listings on US exchanges, while overcoming segmentation and bonding are associated with higher announcement returns on the London Stock Exchange. The evidence is mixed for continental European exchanges and for Tokyo. Our results highlight the role of the destination market in value creation around cross-listings.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 10 (October)
Pages: 1898-1908

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:10:p:1898-1908

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

Related research

Keywords: Cross-listings Capital market integration Investor protection Market liquidity Information disclosure;

References

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Citations

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Cited by:
  1. Engelen, Peter-Jan & van Essen, Marc, 2010. "Underpricing of IPOs: Firm-, issue- and country-specific characteristics," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1958-1969, August.
  2. Mejda Bahlous, 2013. "Does Cross-Listing Benefit the Shareholders? Evidence from Companies in the GCC Countries?," Asia-Pacific Financial Markets, Springer, vol. 20(4), pages 345-381, November.
  3. Frijns, Bart & Gilbert, Aaron & Tourani-Rad, Alireza, 2010. "The dynamics of price discovery for cross-listed shares: Evidence from Australia and New Zealand," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 498-508, March.
  4. 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.
  5. Berkman, Henk & Nguyen, Nhut H., 2010. "Domestic liquidity and cross-listing in the United States," Journal of Banking & Finance, Elsevier, vol. 34(6), pages 1139-1151, June.
  6. Boubakri, Narjess & Cosset, Jean-Claude & Samet, Anis, 2010. "The choice of ADRs," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2077-2095, September.
  7. Amira, Khaled & Muzere, Mark L., 2011. "Competition among stock exchanges for equity," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2355-2373, September.
  8. Joyce Hsieh & Chien-Chung Nieh, 2010. "An overview of Asian equity markets," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(2), pages 19-51, November.
  9. Visaltanachoti, Nuttawat & Yang, Ting, 2010. "Speed of convergence to market efficiency for NYSE-listed foreign stocks," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 594-605, March.
  10. Brisley, Neil & Bris, Arturo & Cabolis, Christos, 2011. "A theory of optimal expropriation, mergers and industry competition," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 955-965, April.
  11. You, Leyuan & Parhizgari, Ali M. & Srivastava, Suresh, 2012. "Cross-listing and subsequent delisting in foreign markets," Journal of Empirical Finance, Elsevier, vol. 19(2), pages 200-216.
  12. You, Leyuan & Lucey, Brian M. & Shu, Yan, 2013. "An empirical study of multiple direct international listings," Global Finance Journal, Elsevier, vol. 24(1), pages 69-84.

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