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

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  • Roland Füss
  • Ulrich Hommel
  • Jan‐Carl Plagge

Abstract

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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  • Roland Füss & Ulrich Hommel & Jan‐Carl Plagge, 2016. "Determinants of Liquidity (Re)Allocation and the Decision to Cross‐List or Cross‐Delist," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(4), pages 447-471, October.
  • Handle: RePEc:wly:ijfiec:v:21:y:2016:i:4:p:447-471
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