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Why do U.S. cross-listings matter?

Listed author(s):
  • John Ammer
  • Sara B. Holland
  • David C. Smith
  • Francis E. Warnock

This paper investigates the underlying determinants of home bias using a comprehensive sample of U.S. investor holdings of foreign stocks. We document that U.S. cross-listings are economically important, as U.S. ownership in a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and show that increases in U.S. investment are largest in firms from weak accounting backgrounds and in firms that are otherwise informationally opaque, indicating that U.S. investors value the improvements in disclosure associated with cross-listing. We confirm that relative equity valuations rise for cross-listed stocks, and provide evidence suggesting that valuation increases are due in part to increases in U.S. shareholder demand and in part to the fact that the equities become more attractive to non-U.S. shareholders.

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File URL: http://www.federalreserve.gov/pubs/ifdp/2008/930/default.htm
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File URL: http://www.federalreserve.gov/pubs/ifdp/2008/930/ifdp930.pdf
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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 930.

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Date of creation: 2008
Handle: RePEc:fip:fedgif:930
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  1. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, 05.
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  12. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
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