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Impact of International Cross‐listing on Local Exchanges: Evidence from Chile

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  • Vivekanand Jayakumar

Abstract

This article examines the impact of international cross‐listings on local stock exchanges by focusing on the experience of Chile. First, we analyse the consequences to the domestically traded shares of a sample of Chilean companies that undertook ADR listings. Our findings show that there is no indication of order‐flow migration from the domestic market following cross‐listings. There is, however, evidence that in the aftermath of cross‐listings trading becomes concentrated in the ADR market. There is also some indication of an increase in the base‐level price volatility of the underlying stock series following cross‐listings. Second, we study the changes in Chile's local stock market vis‐à‐vis the ADR market. We observe that the increase in the size and liquidity of the domestic stock exchange is overshadowed by the rapid growth of the ADR market. From a policy perspective, the continued rise in the number of companies undertaking international cross‐listings can cause the local stock markets to become secondary role players relative to the major foreign exchanges, thus affecting domestic financial development.

Suggested Citation

  • Vivekanand Jayakumar, 2002. "Impact of International Cross‐listing on Local Exchanges: Evidence from Chile," International Review of Finance, International Review of Finance Ltd., vol. 3(3‐4), pages 189-211, September.
    • Handle: RePEc:bla:irvfin:v:3:y:2002:i:3-4:p:189-211
    DOI: 10.1111/j.1369-412X.2002.00038.x
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    1. Wurgler, Jeffrey, 2000. "Financial markets and the allocation of capital," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 187-214.
    2. Levine, Ross & Schmukler, Sergio L., 2003. "Migration, spillovers, and trade diversion : the impact of internationalization on stock market liquidity," Policy Research Working Paper Series 3046, The World Bank.
    3. 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.
    4. Shahrokh M Saudagaran, 1988. "An Empirical Study of Selected Factors Influencing the Decision to List on Foreign Stock Exchanges," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(1), pages 101-127, March.
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    Cited by:

    1. Yang, Ann Shawing & Carandang, Craig Alan Uyan, 2017. "Exploring the location and price differentials of cross-listed firms for arbitrage opportunities," Finance Research Letters, Elsevier, vol. 21(C), pages 85-91.
    2. Awadh Saeed Bin-Dohry & Hanita Kadir Shahar & Sharmilawati Sabki & David McMillan, 2021. "The determinants of dual listing decision of firms from ASEAN-5," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1917105-191, January.
    3. International Monetary Fund, 2008. "Can Regional Cross-listings Accelerate Stock Market Development? Empirical Evidence from Sub-Saharan Africa," IMF Working Papers 2008/281, International Monetary Fund.
    4. repec:rnp:ppaper:madd4 is not listed on IDEAS
    5. Olatundun Janet Adelegan, 2009. "The Impact of the Regional Cross-Listing of Stocks on Firm Value in Sub-Saharan Africa," IMF Working Papers 2009/099, International Monetary Fund.

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