IDEAS home Printed from https://ideas.repec.org/a/spr/eurasi/v3y2013i2d10.14208_ebr.2013.03.02.002.html
   My bibliography  Save this article

Are There Valuation and Operating Performance Gains from International Cross Listing? Evidence from Taiwan’s Depositary Receipt Issuers

Author

Listed:
  • Jyh-Dean Hwang

    (National Taiwan University)

Abstract

This article investigates if there are valuation and operating performance gains from international cross listing, using a sample of 55 Taiwanese firms that instituted deposit receipt (DR) programs in the US, the UK and Luxemburg from 1992 to 2009. We find that Tobin’s q, stock returns and operating performance of DR issuers deteriorate and under-perform their benchmarks substantially after issue. Taiwan has been an emerging market not very accessible for foreign investors for the best part of our sample period and DR issuers from Taiwan should be in a better position to reap valuation gains and other benefits by listing their shares in more prestigious markets. Our findings suggest that the potential benefits of international cross listing might not be as significant as previously thought. These results are of practical relevance and contribute to the ongoing debate on the costs and benefits of international cross listing.

Suggested Citation

  • Jyh-Dean Hwang, 2013. "Are There Valuation and Operating Performance Gains from International Cross Listing? Evidence from Taiwan’s Depositary Receipt Issuers," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 137-163, December.
    • Handle: RePEc:spr:eurasi:v:3:y:2013:i:2:d:10.14208_ebr.2013.03.02.002
    DOI: 10.14208/ebr.2013.03.02.002
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.14208/ebr.2013.03.02.002
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.14208/ebr.2013.03.02.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael R. King & Dan Segal, 2009. "The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation," The Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2393-2421, June.
    2. Errunza, Vihang & Losq, Etienne, 1985. "International Asset Pricing under Mild Segmentation: Theory and Test," Journal of Finance, American Finance Association, vol. 40(1), pages 105-124, March.
    3. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why are foreign firms listed in the U.S. worth more?," Journal of Financial Economics, Elsevier, vol. 71(2), pages 205-238, February.
    4. Benos, Evangelos & Weisbach, Michael S., 2004. "Private benefits and cross-listings in the United States," Emerging Markets Review, Elsevier, vol. 5(2), pages 217-240, June.
    5. Werner, Ingrid M & Kleidon, Allan W, 1996. "U.K. and U.S. Trading of British Cross-Listed Stocks: An Intraday Analysis of Market Integration," The Review of Financial Studies, Society for Financial Studies, vol. 9(2), pages 619-664.
    6. Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October.
    7. Merton, Robert C, 1987. "A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
    8. Gil S. Bae & Jinho Jeong & Huey‐Lian Sun & Alex P. Tang, 2002. "Stock Returns and Operating Performance of Securities Issuers," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(3), pages 337-352, September.
    9. Errunza, Vihang R. & Miller, Darius P., 2000. "Market Segmentation and the Cost of the Capital in International Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(4), pages 577-600, December.
    10. Sergei Sarkissian & Michael J. Schill, 2009. "Are there permanent valuation gains to overseas listing?," The Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 371-412, January.
    11. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    12. Inder K. Khurana & Xiumin Martin & Raynolde Periera, 2008. "Cross-listing and Firm Growth," Review of Finance, European Finance Association, vol. 12(2), pages 293-322.
    13. Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2008. "Internationalization and the evolution of corporate valuation," Journal of Financial Economics, Elsevier, vol. 88(3), pages 607-632, June.
    14. Alexander, Gordon J. & Eun, Cheol S. & Janakiramanan, S., 1988. "International Listings and Stock Returns: Some Empirical Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(2), pages 135-151, June.
    15. Andreas Charitou & Christodoulos Louca, 2009. "Cross-Listing and Operating Performance: Evidence from Exchange-Listed American Depositary Receipts," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(1-2), pages 99-129.
    16. Foerster, Stephen R. & Karolyi, G. Andrew, 2000. "The Long-Run Performance of Global Equity Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(4), pages 499-528, December.
    17. Huddart, Steven & Hughes, John S. & Brunnermeier, Markus, 1999. "Disclosure requirements and stock exchange listing choice in an international context," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 237-269, January.
    18. Marco Pagano & Fabio Panetta & and Luigi Zingales, 1998. "Why Do Companies Go Public? An Empirical Analysis," Journal of Finance, American Finance Association, vol. 53(1), pages 27-64, February.
    19. Franck Bancel & Cusha Mittoo, 2001. "European Managerial Perceptions of the Net Benefits of Foreign Stock Listings," European Financial Management, European Financial Management Association, vol. 7(2), pages 213-236, June.
    20. Foerster, Stephen R. & Karolyi, G. Andrew, 1998. "Multimarket trading and liquidity: a transaction data analysis of Canada-US interlistings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 393-412, December.
    21. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    22. Baker, H. Kent & Nofsinger, John R. & Weaver, Daniel G., 2002. "International Cross-Listing and Visibility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(3), pages 495-521, September.
    23. Alexander, Gordon J & Eun, Cheol S & Janakiramanan, S, 1987. "Asset Pricing and Dual Listing on Foreign Capital Markets: A Note," Journal of Finance, American Finance Association, vol. 42(1), pages 151-158, March.
    24. Ian Domowitz & Jack Glen & Ananth Madhavan, 1998. "International Cross-Listing and Order Flow Migration: Evidence from an Emerging Market," Journal of Finance, American Finance Association, vol. 53(6), pages 2001-2027, December.
    25. Sarkissian, Sergei & Schill, Michael J., 2012. "The nature of the foreign listing premium: A cross-country examination," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2494-2511.
    26. Loughran, Tim & Ritter, Jay R, 1997. "The Operating Performance of Firms Conducting Seasoned Equity Offerings," Journal of Finance, American Finance Association, vol. 52(5), pages 1823-1850, December.
    27. Flavin, Thomas & O'Connor, Thomas, 2010. "The sequencing of stock market liberalization events and corporate financing decisions," Emerging Markets Review, Elsevier, vol. 11(3), pages 183-204, September.
    28. Stephen R. Foerster & G. Andrew Karolyi, 1999. "The Effects of Market Segmentation and Investor Recognition on Asset Prices: Evidence from Foreign Stocks Listing in the United States," Journal of Finance, American Finance Association, vol. 54(3), pages 981-1013, June.
    29. Eckbo, B. Espen & Masulis, Ronald W. & Norli, Oyvind, 2000. "Seasoned public offerings: resolution of the 'new issues puzzle'," Journal of Financial Economics, Elsevier, vol. 56(2), pages 251-291, May.
    30. Fama, Eugene F & French, Kenneth R, 1995. "Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-155, March.
    31. Loughran, Tim & Ritter, Jay R, 1995. "The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    32. Robyn McLaughlin & Assem Safieddine & Gopala Vasudevan, 1998. "The Information Content of Corporate Offerings of Seasoned Securities: An Empirical Analysis," Financial Management, Financial Management Association, vol. 27(2), Summer.
    33. Shingo Goto & Masahiro Watanabe & Yan Xu, 2009. "Strategic Disclosure and Stock Returns: Theory and Evidence from US Cross-Listing," The Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1585-1620, April.
    34. Oren Fuerst, 1998. "A Theoretical Analysis of the Investor Protection Regulations Argument for Global Listing of Stocks," Yale School of Management Working Papers ysm106, Yale School of Management.
    35. Bris, Arturo & Cantale, Salvatore & Hrnjić, Emir & Nishiotis, George P., 2012. "The value of information in cross-listing," Journal of Corporate Finance, Elsevier, vol. 18(2), pages 207-220.
    36. Fernandes, Nuno & Ferreira, Miguel A., 2008. "Does international cross-listing improve the information environment," Journal of Financial Economics, Elsevier, vol. 88(2), pages 216-244, May.
    37. Dharan, Bala G & Ikenberry, David L, 1995. "The Long-Run Negative Drift of Post-listing Stock Returns," Journal of Finance, American Finance Association, vol. 50(5), pages 1547-1574, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jyh-Dean Hwang, 2013. "Are There Valuation and Operating Performance Gains from International Cross Listing? Evidence from Taiwan’s Depositary Receipt Issuers," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(2), pages 137-163, 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.
    3. Sarkissian, Sergei & Schill, Michael J., 2012. "The nature of the foreign listing premium: A cross-country examination," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2494-2511.
    4. Ghadhab, Imen & M’rad, Mouna, 2018. "Does US cross-listing come with incremental benefit for already UK cross-listed firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 188-204.
    5. Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2008. "Internationalization and the evolution of corporate valuation," Journal of Financial Economics, Elsevier, vol. 88(3), pages 607-632, June.
    6. Luo, Yongli & Fang, Fang & Esqueda, Omar A., 2012. "The overseas listing puzzle: Post-IPO performance of Chinese stocks and ADRs in the U.S. market," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 193-211.
    7. Sarkissian, Sergei & Schill, Michael J., 2004. "Are There Permanent Valuation Gains to Overseas Listing? Evidence from Market Sequencing and Selection," Working Papers 05-4, University of Pennsylvania, Wharton School, Weiss Center.
    8. Sarkissian, Sergei & Schill, Michael, 2010. "Why are U.S. firms listed in foreign markets worth more?," MPRA Paper 27543, University Library of Munich, Germany.
    9. Bancel, Franck & Kalimipalli, Madhu & Mittoo, Usha R., 2009. "Cross-listing and the long-term performance of ADRs: Revisiting European evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 895-923, December.
    10. Hail, Luzi & Leuz, Christian, 2009. "Cost of capital effects and changes in growth expectations around U.S. cross-listings," Journal of Financial Economics, Elsevier, vol. 93(3), pages 428-454, September.
    11. Esqueda, Omar A. & Jackson, Dave O., 2015. "Cross-listing performance and insider ownership: The experience of U.S. investors," Journal of Multinational Financial Management, Elsevier, vol. 32, pages 77-94.
    12. Li, Shi & Li, Tianze & Mittoo, Usha & Song, Xiaoping & Zheng, Steven Xiaofan, 2019. "ADR valuation and listing of foreign firms in U.S. Equity markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 58(C), pages 284-298.
    13. 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.
    14. Imen Ghadhab & Slaheddine Hellara & Abdelkader Derbali, 2018. "Why do firms make an additional cross-listing? An empirical investigation using multiple failure time model," Journal of Asset Management, Palgrave Macmillan, vol. 19(3), pages 191-203, May.
    15. Bailey, Warren & Andrew Karolyi, G. & Salva, Carolina, 2006. "The economic consequences of increased disclosure: Evidence from international cross-listings," Journal of Financial Economics, Elsevier, vol. 81(1), pages 175-213, July.
    16. Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October.
    17. Peter M. Clarkson & Stephen F. Gray & Vanitha Ragunathan, 2018. "Market timing as an explanation for the short‐lived premium on cross‐listing," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(S1), pages 131-157, November.
    18. Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2012. "Financing of firms in developing countries : lessons from research," Policy Research Working Paper Series 6036, The World Bank.
    19. Kim, Oksana, 2017. "The joint role of the bonding mechanisms and the reduction in market segmentation in valuation of firms cross-listed as Global Depositary Receipts (GDRs)," Journal of Multinational Financial Management, Elsevier, vol. 39(C), pages 19-38.
    20. Dimic, Nebojsa & Orlov, Vitaly & Piljak, Vanja, 2022. "First offshore bond issuances and firm valuation," International Review of Financial Analysis, Elsevier, vol. 83(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:eurasi:v:3:y:2013:i:2:d:10.14208_ebr.2013.03.02.002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.