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Stock Price Informativeness, Cross-Listings and Investment Decisions

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Author Info
Foucault, Thierry
Gehrig, Thomas

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Abstract

We show that a cross-listing allows a firm to make better investment decisions because it enhances stock price informativeness. This theory of cross-listings yields a rich set of new predictions. In particular, it implies that the sensitivity of investment to stock prices should be larger for cross-listed firms. Moreover, the increase in value generated by a cross-listing (the 'cross-listing premium') should be positively related to the size of growth opportunities and negatively related to the quality of managerial information. The sensitivity of the cross-listing premium to the size of growth opportunities increases when holdings and trading become more evenly distributed between foreign and domestic markets. Last, we show that concentration of trading in the home market ('flow-back') can indeed increase the cross-listing premium for some firms.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5722.

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Date of creation: Jun 2006
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Handle: RePEc:cpr:ceprdp:5722

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Related research
Keywords: cross-listing premium; cross-listings; flow-back; investment decisions; ownership; price informativeness;

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Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Wölfle, Marco, 2007. "Price Discovery for Cross-Listed Securities from Emerging Eastern European Countries," ZEW Discussion Papers 07-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  2. Claessens, Stijn & Schmukler, Sergio L., 2007. "International financial integration through equity markets : which firms from which countries go global ?," Policy Research Working Paper Series 4146, The World Bank. [Downloadable!]
    Other versions:
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