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Determinants of Liquidity (Re)Allocation and the Decision to Cross‐List or Cross‐Delist

Listed author(s):
  • Roland Füss
  • Ulrich Hommel
  • Jan‐Carl Plagge

This paper examines the factors influencing the liquidity allocation between local and foreign dual listings. Based on a comprehensive data set covering the period between 2001 and 2011, empirical results suggest that the fraction of trading in the foreign listing decreases with a higher degree of stock market integration measured as the stock price correlation with the world market. Furthermore, the analysis of individual cross‐listings reveals that both an improvement of a country's state of economic development and a better regulatory environment significantly affect the allocation of trading. While an improvement in economic development increases both local and foreign liquidity, a strengthening of regulatory standards leads to a decrease in trading volumes at foreign exchanges. Finally, the liquidity share in the foreign listing is found to decrease over time, a trend that turns out to be driven by developing rather than by developed markets. Copyright © 2016 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 21 (2016)
Issue (Month): 4 (October)
Pages: 447-471

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Handle: RePEc:wly:ijfiec:v:21:y:2016:i:4:p:447-471
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