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Has New York Become Less Competitive in Global Markets? Evaluating Foreign Listing Choices Over Time

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  • Craig Doidge
  • G. Andrew Karolyi
  • Rene M. Stulz

Abstract

We study the determinants and consequences of cross-listings on the New York and London stock exchanges from 1990 to 2005. This investigation enables us to evaluate the relative benefits of New York and London exchange listings and to assess whether these relative benefits have changed over time, perhaps as a result of the passage of the Sarbanes-Oxley Act of Congress (SOX) in 2002. We find that cross-listings have been falling on U.S. exchanges as well as on the Main Market in London. This decline in cross-listings is explained by changes in firm characteristics rather than by changes in the benefits of cross-listings. We show that, after controlling for firm characteristics, there is no deficit in cross-listing counts on U.S. exchanges related to SOX. Investigating the cross-listing premium from 1990 to 2005, we find that there is a significant premium for U.S. exchange listings every year, that the premium has not fallen significantly in recent years, that it persists even when allowing for unobservable firm characteristics, and that there is a permanent premium in event time. In contrast, there is no premium for London listings for any year. Cross-listing in the U.S. leads firms to increase their capital-raising activity at home and abroad while a London listing has no such impact. Our evidence is consistent with the theory that an exchange listing in New York has unique governance benefits for foreign firms. These benefits have not been seriously eroded by SOX and cannot be replicated through a London listing.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13079.

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Date of creation: May 2007
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Handle: RePEc:nbr:nberwo:13079

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Cited by:
  1. Goergen, M. & Renneboog, L.D.R., 2008. "Contractual Corporate Governance," Discussion Paper, Tilburg University, Center for Economic Research 2008-41, Tilburg University, Center for Economic Research.
  2. Athanasios Koulakiotis & Katerina Lyroudi & Nikos Thomaidis & Nicholas Papasyriopoulos, 2010. "The impact of cross-listings on the UK and the German stock markets," Studies in Economics and Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 27(1), pages 4-18, March.
  3. Marcelo Bianconi & Richard Chen, 2009. "Firm Value, Cross-Listing Premium and the Sarbanes-Oxley Act," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0738, Department of Economics, Tufts University.
  4. Ferreira, Miguel A. & Matos, Pedro, 2008. "The colors of investors' money: The role of institutional investors around the world," Journal of Financial Economics, Elsevier, Elsevier, vol. 88(3), pages 499-533, June.
  5. Steen Thomsen & Frederik Vinten, 2014. "Delistings and the costs of governance: a study of European stock exchanges 1996–2004," Journal of Management and Governance, Springer, Springer, vol. 18(3), pages 793-833, August.
  6. Berkman, Henk & Cole, Rebel A. & Fu, Lawrence J., 2009. "Expropriation through loan guarantees to related parties: Evidence from China," Journal of Banking & Finance, Elsevier, Elsevier, vol. 33(1), pages 141-156, January.
  7. Fernandes, Nuno & Lel, Ugur & Miller, Darius P., 2010. "Escape from New York: The market impact of loosening disclosure requirements," Journal of Financial Economics, Elsevier, Elsevier, vol. 95(2), pages 129-147, February.
  8. Thomas O'Connor & Todd Mitton, 2008. "Investability and Firm Value," Economics, Finance and Accounting Department Working Paper Series, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n1920508.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

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