Valuation of Canadian- vs. U.S.-Listed Equity: Is There a Discount?
The authors examine how the valuation multiples assigned to the equity of Canadian-listed firms compare with the equity of comparable firms listed in the United States. They find that Canadian-listed firms trade at a discount to U.S.-listed firms across a range of valuation measures. Differences in accounting do not explain this discount, based on a comparison of Canadian interlisted firms that report under both Canadian and U.S. generally accepted accounting principles. This discount exists despite Canadian-listed firms having a lower cost of equity and higher profitability than comparable U.S-listed firms. Consistent with theory, part of the differences in valuation are explained by company-specific factors, such as industry, firm size, cost of equity, or profitability. The authors also find that characteristics of the stock market where the share is listed affect valuation, such as secondary market liquidity and the relative performance of the overall equity market. They find that a country discount persists after controlling for these company-specific and market-specific factors, which suggests that Canadian and U.S. financial markets remain segmented.
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
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.:
- Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, .
"Legal Determinants of External Finance,"
19443, Harvard University OpenScholar.
- RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," NBER Working Papers 5879, National Bureau of Economic Research, Inc.
- Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
- Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004.
"Why are foreign firms listed in the U.S. worth more?,"
Journal of Financial Economics,
Elsevier, vol. 71(2), pages 205-238, February.
- Craig Doidge & G. Andrew Karolyi & Rene M. Stulz, 2001. "Why are Foreign Firms Listed in the U.S. Worth More?," NBER Working Papers 8538, National Bureau of Economic Research, Inc.
- Davide Lombardo & Marco Pagano, 1999.
"Legal Determinants of the Return on Equity,"
CSEF Working Papers
24, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Dec 2000.
- Robert Hodrick & David Ng & Paul Sengmueller, 1999.
"An International Dynamic Asset Pricing Model,"
International Tax and Public Finance,
Springer, vol. 6(4), pages 597-620, November.
- Utpal Bhattacharya & Hazem Daouk, 2002. "The World Price of Insider Trading," Journal of Finance, American Finance Association, vol. 57(1), pages 75-108, 02.
- Chan, K. C. & Fong, Wai-Ming & Kho, Bong-Chan & Stulz, ReneM., 1996.
"Information, trading and stock returns: Lessons from dually-listed securities,"
Journal of Banking & Finance,
Elsevier, vol. 20(7), pages 1161-1187, August.
- K.C. Chan & Wai-Ming Fong & Rene M. Stulz, 1994. "Information, Trading and Stock Returns: Lessons from Dually-Listed Securities," NBER Working Papers 4743, National Bureau of Economic Research, Inc.
- Randall Morck & Bernard Yeung & Wayne Yu, 1999.
"The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements?,"
Harvard Institute of Economic Research Working Papers
1879, Harvard - Institute of Economic Research.
- Randall Morck & Bernard Yeung & Wayne Wu, 1999. "The Information Content of Stock Markets: Why do Emerging Markets have Synchronous Stock Price Movements?," William Davidson Institute Working Papers Series 44, William Davidson Institute at the University of Michigan.
- Foerster, Stephen R. & Karolyi, G. Andrew, 1998. "Multimarket trading and liquidity: a transaction data analysis of Canada-US interlistings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 393-412, December.
- Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
- Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
- Narayana R. Kocherlakota, 1995.
"The equity premium: it's still a puzzle,"
Discussion Paper / Institute for Empirical Macroeconomics
102, Federal Reserve Bank of Minneapolis.
- Pagano, Marco & Randl, Otto & Roell, Ailsa A. & Zechner, Josef, 2001.
"What makes stock exchanges succeed? Evidence from cross-listing decisions,"
European Economic Review,
Elsevier, vol. 45(4-6), pages 770-782, May.
- Marco Pagano & Otto Randl & Ailsa A. Röell & Josef Zechner, 2000. "What Makes Stock Exchanges Succeed? Evidence from Cross-Listing Decisions," CSEF Working Papers 50, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Pagano, Marco & Randl, Otto & Röell, Ailsa A & Zechner, Josef, 2001. "What Makes Stock Exchanges Succeed? Evidence from Cross-Listing Decisions," CEPR Discussion Papers 2683, C.E.P.R. Discussion Papers.
- James Claus, 2001. "Equity Premia as Low as Three Percent? Evidence from Analysts' Earnings Forecasts for Domestic and International Stock Markets," Journal of Finance, American Finance Association, vol. 56(5), pages 1629-1666, October.
- John M. Griffin, 2002. "Are the Fama and French Factors Global or Country Specific?," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 783-803.
- Jorion, Philippe & Schwartz, Eduardo, 1986. " Integration vs. Segmentation in the Canadian Stock Market," Journal of Finance, American Finance Association, vol. 41(3), pages 603-14, July.
- W. Scott Bauman & C. Mitchell Conover & Don R. Cox, 2002. "Are the Best Small Companies the Best Investments?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(2), pages 169-186.
- Beckers, Stan & Grinold, Richard & Rudd, Andrew & Stefek, Dan, 1992. "The relative importance of common factors across the European equity markets," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 75-95, February.
- Kasa, Kenneth, 1997. "Consumption-based versus production-based models of international equity markets," Journal of International Money and Finance, Elsevier, vol. 16(5), pages 653-680, September.
- Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, 06.
- Lessard, Donald R, 1974. "World, National, and Industry Factors in Equity Returns," Journal of Finance, American Finance Association, vol. 29(2), pages 379-91, May.
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:03-6. 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: ()
If references are entirely missing, you can add them using this form.