IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Corporate governance, agency problems and international cross-listings: A defense of the bonding hypothesis

  • Karolyi, G. Andrew
Registered author(s):

    Why firms from around the world seek to cross-list their shares on overseas exchanges has intrigued scholars during the past two decades. A general dissatisfaction with the conventional wisdom about investment barriers segmenting global investors and how cross-listings overcome those barriers cleared the way for newer wisdom about informational problems and agency conflicts, and how firms could overcome weaknesses in corporate governance by listing on, and thus “bonding” to, overseas markets with stronger regulatory oversight, stringent reporting and disclosure requirements and investor protections. Critics have challenged the viability of the bonding hypothesis, which I answer in this review.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S1566014112000507
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 13 (2012)
    Issue (Month): 4 ()
    Pages: 516-547

    as
    in new window

    Handle: RePEc:eee:ememar:v:13:y:2012:i:4:p:516-547
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620356

    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.:

    as in new window
    1. Litvak, Kate, 2007. "The effect of the Sarbanes-Oxley act on non-US companies cross-listed in the US," Journal of Corporate Finance, Elsevier, vol. 13(2-3), pages 195-228, June.
    2. Eun, Cheol S & Janakiramanan, S, 1986. " A Model of International Asset Pricing with a Constraint on the Foreign Equity Ownership," Journal of Finance, American Finance Association, vol. 41(4), pages 897-914, September.
    3. Fernandes, Nuno & Lel, Ugur & Miller, Darius P., 2010. "Escape from New York: The market impact of loosening disclosure requirements," Journal of Financial Economics, Elsevier, vol. 95(2), pages 129-147, February.
    4. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    5. Susan Chaplinsky & Latha Ramchand, 2000. "The Impact of Global Equity Offerings," Journal of Finance, American Finance Association, vol. 55(6), pages 2767-2789, December.
    6. Joseph D. Piotroski & Suraj Srinivasan, 2008. "Regulation and Bonding: The Sarbanes-Oxley Act and the Flow of International Listings," Journal of Accounting Research, Wiley Blackwell, vol. 46(2), pages 383-425, 05.
    7. Doidge, Craig, 2004. "U.S. cross-listings and the private benefits of control: evidence from dual-class firms," Journal of Financial Economics, Elsevier, vol. 72(3), pages 519-553, June.
    8. 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.
    9. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why Do Countries Matter So Much for Corporate Governance?," Working Paper Series 2004-16, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    10. Errunza, Vihang & Losq, Etienne, 1985. " International Asset Pricing under Mild Segmentation: Theory and Test," Journal of Finance, American Finance Association, vol. 40(1), pages 105-24, March.
    11. Michael R. King & Dan Segal, 2006. "The Long-Term Effects of Cross-Listing Investor Recognition, and Ownership Structure on Valuation," Working Papers 06-44, Bank of Canada.
    12. Jean-Claude Cosset & Charles Martineau & Anis Samet, 2012. "Do Political Institutions Affect the Choice of the U.S. Cross-Listing Venue?," Cahiers de recherche 1210, CIRPEE.
    13. Alan G. Ahearne & William L. Griever & Francis E. Warnock, 2000. "Information costs and home bias: an analysis of U.S. holdings of foreign equities," International Finance Discussion Papers 691, Board of Governors of the Federal Reserve System (U.S.).
    14. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
    15. Sergei Sarkissian & Michael J. Schill, 2009. "Are there permanent valuation gains to overseas listing?," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 371-412, January.
    16. René M. Stulz, 1999. "Golbalization, Corporate Finance, And The Cost Of Capital," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(3), pages 8-25.
    17. 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, vol. 19(1), pages 101-127, March.
    18. Craig Doidge & G. Andrew Karolyi & Karl V. Lins & Darius P. Miller & René M. Stulz, 2009. "Private Benefits of Control, Ownership, and the Cross-listing Decision," Journal of Finance, American Finance Association, vol. 64(1), pages 425-466, 02.
    19. Coffee, John C., Jr., 2007. "Law and the Market: The Impact of Enforcement," Working Papers 07-3, University of Pennsylvania, Wharton School, Weiss Center.
    20. Aggarwal, Reena & Dahiya, Sandeep & Klapper, Leora, 2007. "ADR holdings of US-based emerging market funds," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1649-1667, June.
    21. Pinegar, J. Michael & Ravichandran, R., 2003. "U. S. Investors' Perceptions of Corporate Control in Mexico: Evidence from Sibling ADRs," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 213-230, March.
    22. Frésard, Laurent & Salva, Carolina, 2010. "The value of excess cash and corporate governance: Evidence from US cross-listings," Journal of Financial Economics, Elsevier, vol. 98(2), pages 359-384, November.
    23. Merton, Robert C., 1987. "A simple model of capital market equilibrium with incomplete information," Working papers 1869-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    24. Burns, Natasha & Francis, Bill B. & Hasan, Iftekhar, 2007. "Cross-listing and legal bonding: Evidence from mergers and acquisitions," Journal of Banking & Finance, Elsevier, vol. 31(4), pages 1003-1031, April.
    25. Christian Leuz & Karl V. Lins & Francis E. Warnock, 2009. "Do Foreigners Invest Less in Poorly Governed Firms?," Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 3245-3285, August.
    26. Alexander Dyck & Luigi Zingales, 2004. "Private Benefits of Control: An International Comparison," Journal of Finance, American Finance Association, vol. 59(2), pages 537-600, 04.
    27. Holger Daske & Luzi Hail & Christian Leuz & Rodrigo Verdi, 2008. "Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences," Journal of Accounting Research, Wiley Blackwell, vol. 46(5), pages 1085-1142, December.
    28. 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.
    29. Ko, Kwangsoo & Lee, Insup & Yun, Kesop, 1997. "Foreign listings, firm value, and volatility: The case of Japanese firms' listings on the US stock markets," Japan and the World Economy, Elsevier, vol. 9(1), pages 57-69, March.
    30. Ayyagari, Meghana & Doidge, Craig, 2010. "Does cross-listing facilitate changes in corporate ownership and control?," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 208-223, January.
    31. Shahrokh M Saudagaran & Gary C Biddle, 1995. "Foreign Listing Location: A Study of MNCs and Stock Exchanges in Eight Countries," Journal of International Business Studies, Palgrave Macmillan, vol. 26(2), pages 319-341, June.
    32. Marco Pagano & Ailsa A. Roell & Joseph Zechner, 1999. "The Geography of Equity Listing; Why Do Companies List Abroad?," CSEF Working Papers 28, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Sep 2001.
    33. Hali J. Edison & Francis E. Warnock, 2004. "U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 691-704, August.
    34. Evangelos Benos & Michael S. Weisbach, 2004. "Private Benefits and Cross-Listings in the United States," NBER Working Papers 10224, National Bureau of Economic Research, Inc.
    35. Loughran, Tim & Ritter, Jay R, 1995. " The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    36. Bailey, Warren & Karolyi, G. Andrew & Salva, Carolina, 2004. "The Economic Consequences of Increased Disclosure:Evidence from International Cross-Listings," Working Paper Series 2004-7, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    37. Howe, John S. & Madura, Jeff & Tucker, Alan L., 1993. "International listings and risk," Journal of International Money and Finance, Elsevier, vol. 12(1), pages 99-110, February.
    38. Stapleton, R C & Subrahmanyam, Marti G, 1977. "Market Imperfections, Capital Market Equilibrium and Corporation Finance," Journal of Finance, American Finance Association, vol. 32(2), pages 307-19, May.
    39. Chemmanur, Thomas J. & Fulghieri, Paolo, 2006. "Competition and cooperation among exchanges: A theory of cross-listing and endogenous listing standards," Journal of Financial Economics, Elsevier, vol. 82(2), pages 455-489, November.
    40. Bergman, Nittai K. & Nicolaievsky, Daniel, 2007. "Investor protection and the Coasian view," Journal of Financial Economics, Elsevier, vol. 84(3), pages 738-771, June.
    41. Karolyi, G. Andrew, 2004. "The World of Cross-Listings and Cross-Listings of the World: Challenging Conventional Wisdom," Working Paper Series 2004-14, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    42. Jordan Siegel, 2009. "Is there a better commitment mechanism than cross-listings for emerging-economy firms? Evidence from Mexico," Journal of International Business Studies, Palgrave Macmillan, vol. 40(7), pages 1171-1191, September.
    43. Michael Pinegar, J. & Ravichandran, R., 2002. "Global and local information asymmetries, illiquidity and SEC Rule 144A/Regulation S: The case of Indian GDRs," Journal of Banking & Finance, Elsevier, vol. 26(8), pages 1645-1673, August.
    44. 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(03), pages 495-521, September.
    45. Mittoo, Usha R., 2003. "Globalization and the value of US listing: Revisiting Canadian evidence," Journal of Banking & Finance, Elsevier, vol. 27(9), pages 1629-1661, September.
    46. Lau, Sie Ting & Diltz, J. David & Apilado, Vincent P., 1994. "Valuation effects of international stock exchange listings," Journal of Banking & Finance, Elsevier, vol. 18(4), pages 743-755, September.
    47. Loureiro, Gilberto, 2010. "The reputation of underwriters: A test of the bonding hypothesis," Journal of Corporate Finance, Elsevier, vol. 16(4), pages 516-532, September.
    48. Miller, Darius P. & Puthenpurackal, John J., 2002. "The Costs, Wealth Effects, and Determinants of International Capital Raising: Evidence from Public Yankee Bonds," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 455-485, October.
    49. Sergei Sarkissian, 2004. "The Overseas Listing Decision: New Evidence of Proximity Preference," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 769-809.
    50. Arturo Bris & Salvatore Cantale & George P. Nishiotis, 2007. "A Breakdown of the Valuation Effects of International Cross-listing," European Financial Management, European Financial Management Association, vol. 13(3), pages 498-530.
    51. 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.
    52. Lopez-de-Silanes, Florencio & Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei, 2008. "The Law and Economics of Self-dealing," Scholarly Articles 2907526, Harvard University Department of Economics.
    53. Dasgupta, Sudipto & Gan, Jie & Gao, Ning, 2010. "Transparency, Price Informativeness, and Stock Return Synchronicity: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(05), pages 1189-1220, October.
    54. Edward Glaeser & Simon Johnson & Andrei Shleifer, 2001. "Coase Versus The Coasians," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 853-899, August.
    55. 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 151-58, March.
    56. 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(02), pages 135-151, June.
    57. Craig Doidge & G. Andrew Karolyi & René M. Stulz, 2008. "Why Do Foreign Firms Leave U.S. Equity Markets?," NBER Working Papers 14245, National Bureau of Economic Research, Inc.
    58. 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.
    59. 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.
    60. Ugur Lel & Darius P. Miller, 2008. "International Cross-Listing, Firm Performance, and Top Management Turnover: A Test of the Bonding Hypothesis," Journal of Finance, American Finance Association, vol. 63(4), pages 1897-1937, 08.
    61. 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, 06.
    62. András Marosi & Nadia Massoud, 2008. ""You Can Enter but You Cannot Leave…": U.S. Securities Markets and Foreign Firms," Journal of Finance, American Finance Association, vol. 63(5), pages 2477-2506, October.
    63. Foucault, Thierry & Gehrig, Thomas, 2006. "Stock Price Informativeness, Cross-Listings and Investment Decisions," CEPR Discussion Papers 5722, C.E.P.R. Discussion Papers.
    64. Doidge, Craig & Andrew Karolyi, G. & Stulz, Ren M., 2009. "Has New York become less competitive than London in global markets? Evaluating foreign listing choices over time," Journal of Financial Economics, Elsevier, vol. 91(3), pages 253-277, March.
    65. 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.
    66. Stephen R Foerster & G Andrew Karolyi, 1993. "International Listings of Stocks: The Case of Canada and the U.S," Journal of International Business Studies, Palgrave Macmillan, vol. 24(4), pages 763-784, December.
    67. Lang, Mark & Smith Raedy, Jana & Wilson, Wendy, 2006. "Earnings management and cross listing: Are reconciled earnings comparable to US earnings?," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 255-283, October.
    68. Art Durnev & E. Han Kim, 2005. "To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation," Journal of Finance, American Finance Association, vol. 60(3), pages 1461-1493, 06.
    69. Doidge, Craig & Karolyi, George Andrew & Stulz, Rene M., 2012. "Financial Globalization and the Rise of IPOs outside the U.S," Working Paper Series 2012-13, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    70. 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.
    71. Dahya, Jay & Dimitrov, Orlin & McConnell, John J., 2008. "Dominant shareholders, corporate boards, and corporate value: A cross-country analysis," Journal of Financial Economics, Elsevier, vol. 87(1), pages 73-100, January.
    72. Howe, John S. & Madura, Jeff, 1990. "The impact of international listings on risk : Implications for capital market integration," Journal of Banking & Finance, Elsevier, vol. 14(6), pages 1133-1142, December.
    73. Torabzadeh, Khalil M. & Berlin, William J. & Zivney Maxon, Terry L., 1992. "Valuation effects of international listings," Global Finance Journal, Elsevier, vol. 3(2), pages 159-170.
    74. Mark H. Lang & Karl V. Lins & Darius P. Miller, 2004. "Concentrated Control, Analyst Following, and Valuation: Do Analysts Matter Most When Investors Are Protected Least?," Journal of Accounting Research, Wiley Blackwell, vol. 42(3), pages 589-623, 06.
    75. Karolyi, G. Andrew, 2003. "DaimlerChrysler AG, the first truly global share," Journal of Corporate Finance, Elsevier, vol. 9(4), pages 409-430, September.
    76. You, Leyuan & Parhizgari, Ali M. & Srivastava, Suresh, 2012. "Cross-listing and subsequent delisting in foreign markets," Journal of Empirical Finance, Elsevier, vol. 19(2), pages 200-216.
    77. Lins, Karl V. & Strickland, Deon & Zenner, Marc, 2005. "Do Non-U.S. Firms Issue Equity on U.S. Stock Exchanges to Relax Capital Constraints?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(01), pages 109-133, March.
    78. O'Connor, Thomas G., 2006. "Cross-listing in the U.S. and domestic investor protection," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(3), pages 413-436, July.
    79. Mark T. Bradshaw & Brian J. Bushee & Gregory S. Miller, 2004. "Accounting Choice, Home Bias, and U.S. Investment in Non-U.S. Firms," Journal of Accounting Research, Wiley Blackwell, vol. 42(5), pages 795-841, December.
    80. 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(04), pages 499-528, December.
    81. Ritter, Jay R, 1991. " The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
    82. Leuz, Christian, 2006. "Cross listing, bonding and firms' reporting incentives: A discussion of Lang, Raedy and Wilson (2006)," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 285-299, October.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:ememar:v:13:y:2012:i:4:p:516-547. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.