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A Breakdown of the Valuation Effects of International Cross-Listing

  • Arturo Bris
  • Salvatore Cantale
  • George Nishiotis

It is well known that cross-listing domestic stocks in foreign exchanges has significant valuation effects on the listed company's shares. Using a sample of firms with dual shares, we explore the differential effects of cross-listing on prices and we are able to separate the different sources of the benefits of cross-listing. Our results show that even though the market segmentation and bonding effects are both statistically significant, the economic significance of segmentation is more than double that of bonding. Furthermore, we document an economically and statistically significant increasse in the liquidity of both share classes after the listing. Overall, our results explain why less and less firms are willing to list in the U.S.: Sarbanes Oxley has increased the cost of adopting better governance while its benefits are not substantial; and market segmentation has decreased significantly in the last years.

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File URL: http://icfpub.som.yale.edu/publications/2602
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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number amz2602.

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Date of creation: 01 Mar 2006
Date of revision: 01 Aug 2006
Handle: RePEc:ysm:somwrk:amz2602
Contact details of provider: Web page: http://icf.som.yale.edu/

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  1. Merton, Robert C., 1987. "A simple model of capital market equilibrium with incomplete information," Working papers 1869-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Reese, William Jr. & Weisbach, Michael S., 2002. "Protection of minority shareholder interests, cross-listings in the United States, and subsequent equity offerings," Journal of Financial Economics, Elsevier, vol. 66(1), pages 65-104, October.
  3. Zingales, Luigi, 1995. "Insider Ownership and the Decision to Go Public," Review of Economic Studies, Wiley Blackwell, vol. 62(3), pages 425-48, July.
  4. G. Andrew Karolyi, 2006. "The World of Cross-Listings and Cross-Listings of the World: Challenging Conventional Wisdom," Review of Finance, European Finance Association, vol. 10(1), pages 99-152.
  5. Marco Pagano & Ailsa A. Röell & Josef Zechner, 2002. "The Geography of Equity Listing: Why Do Companies List Abroad?," Journal of Finance, American Finance Association, vol. 57(6), pages 2651-2694, December.
  6. Oren Fuerst, 1998. "A Theoretical Analysis of the Investor Protection Regulations Argument for Global Listing of Stocks," Yale School of Management Working Papers ysm106, Yale School of Management.
  7. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
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    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
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  8. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
  9. Domowitz, Ian & Glen, Jack & Madhavan, Ananth, 1997. " Market Segmentation and Stock Prices: Evidence from an Emerging Market," Journal of Finance, American Finance Association, vol. 52(3), pages 1059-85, July.
  10. Hietala, Pekka T, 1989. " Asset Pricing in Partially Segmented Markets: Evidence from the Finnish Market," Journal of Finance, American Finance Association, vol. 44(3), pages 697-718, July.
  11. Nishiotis, George P., 2004. "Do Indirect Investment Barriers Contribute to Capital Market Segmentation?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(03), pages 613-630, September.
  12. Bonser-Neal, Catherine, et al, 1990. " International Investment Restrictions and Closed-End Country Fund Prices," Journal of Finance, American Finance Association, vol. 45(2), pages 523-47, June.
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