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The impact of cross-delisting from the U.S. On firms’ financial constraints

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  • Loureiro, Gilberto
  • Silva, Sónia

Abstract

We investigate the impact of cross-delisting on firms’ financial constraints. We find that firms that cross-delisted from a U.S. stock exchange face stronger post-delisting financial constraints than their cross-listed counterparts, as measured by investment-to-cash flow and cash-to-cash flow sensitivities. Following a delisting, the sensitivity of investment to cash flow increases significantly, and firms also tend to save more cash out of cash flows. These effects are mainly driven by cross-delisted firms from countries with weaker investor protection and are more predominant after the passage of Rule 12 h-6 (of 2007), which made it easier for foreign firms to leave U.S. markets.

Suggested Citation

  • Loureiro, Gilberto & Silva, Sónia, 2020. "The impact of cross-delisting from the U.S. On firms’ financial constraints," Journal of Business Research, Elsevier, vol. 108(C), pages 132-146.
    • Handle: RePEc:eee:jbrese:v:108:y:2020:i:c:p:132-146
    DOI: 10.1016/j.jbusres.2019.09.055
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    More about this item

    Keywords

    Cross-delisting; Financial constraints; Information asymmetry; Investment-to-cash flow sensitivity; Cash-to-cash flow sensitivity;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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