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Stock price informativeness, cross-listings and investment decisions

Author

Listed:
  • Thierry Foucault

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Thomas Gehrig

Abstract

We show that a cross-listing enables firms to obtain, from the stock market, more precise information about the value of their growth opportunities. Thus, cross-listed firms make better investment decisions and trade at a premium. This theory of cross-listings implies that the sensitivity of investment to stock prices is larger for cross-listed firms. Moreover, the cross-listing premium is positively related to the size of growth opportunities and negatively related to the quality of managerial information. The sensitivity of the premium to the size of growth opportunities increases with factors that strengthen the impact of the cross-listing on price informativeness.

Suggested Citation

  • Thierry Foucault & Thomas Gehrig, 2008. "Stock price informativeness, cross-listings and investment decisions," Post-Print hal-00459807, HAL.
  • Handle: RePEc:hal:journl:hal-00459807
    DOI: 10.1016/j.jfineco.2007.05.007
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00459807
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    More about this item

    Keywords

    Cross-listings; Cross-listing premium; Price informativeness; Investment;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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