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Where is the Market? Evidence from Cross-Listings

  • Halling, Michael
  • Pagano, Marco
  • Randl, Otto
  • Zechner, Josef

We investigate the distribution of trading volume across different venues after a company lists abroad. In most cases, after an initial blip, foreign trading declines rapidly to extremely low levels. However, there is considerable cross-sectional variation in the persistence and magnitude of foreign trading. The ratio between foreign and domestic trading volume is higher for smaller, more export and high-tech oriented companies. It is also higher for companies that cross-list on markets with lower trading costs and better insider trading protection. Foreign trading is high close to the cross-listing date but decreases dramatically in the subsequent six months. This accords with the ‘flow-back hypothesis’ that declining foreign trading is associated with the gravitational pull of the home market.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4987.

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Date of creation: Apr 2005
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Handle: RePEc:cpr:ceprdp:4987
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