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Valuation effects of termination of cross-listings

Author

Listed:
  • Füss, Roland

    () (University of St.Gallen)

  • Hommel, Urich

    () (EBS Business School)

  • Plagge, Jan-Carl

    () (EBS Business School)

Abstract

In the past, segmentation of capital markets incentivized numerous companies to crosslist in more integrated markets by promising better investor recognition and thereby lowering cost of capital and increasing stock liquidity. In recent years, however, more and more companies have decided to terminate these dual listings. In contrast to previous studies, which mainly focus on the benefits and/or drawbacks of the initial cross-listings, this paper investigates share price effects linked to the termination of cross-listings. A special focus lies on the characteristics of companies’ home markets to explain observed price effects. The empirical results show negative abnormal returns on the event date as well as negative cumulative abnormal returns in the weeks following the announcement of the termination of the secondary listing. The absolute value of the price reaction varies positively with foreign investors’ difficulty to enter the companies’ local market and the fraction of liquidity allocated to the foreign listing prior to the delisting event.

Suggested Citation

  • Füss, Roland & Hommel, Urich & Plagge, Jan-Carl, 2014. "Valuation effects of termination of cross-listings," Journal of Financial Perspectives, EY Global FS Institute, vol. 2(1), pages 177-193.
  • Handle: RePEc:ris:jofipe:0038
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    More about this item

    Keywords

    ADRs; Cross (De-)Listing; Market Integration; Market Accessibility; Abnormal Returns;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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