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Capital Structure Changes around Cross-Listings

Corporate Governance in the US and Global Settings

ISBN: 978-1-78441-292-0

Publication date: 14 November 2014



We examine what changes, if any, firms are making to their capital structure around the time they cross-list because both of these affect a firm’s corporate governance. Cross-listing requires firms to follow SEC rules and regulations, which helps improve the firm governance. A firm’s capital structure, specifically the use of debt, is an effective way to mitigate the conflict between managers and shareholders by reducing the cash available to managers. We examine whether these governance mechanisms are complimentary or being used as substitutes by cross-listing firms.


We compare the capital structures of Level II and Level III cross-listing firms from both civil law and common law countries in the three years before and the three years after cross-listing.


We show firms are significantly reducing their debt to equity ratio after the cross-listing. This reduction is shown for both Level II and Level III firms; however, it is primarily seen in civil law countries.

Practical implications

The corporate governance improvement firms recognize by cross-listing is partially offset by the reduced use of debt after the cross-listing. These governance characteristics may be especially relevant for shareholders in Level III cross-listings because those firms are actually raising addition cash.



Liao, M.-Y.(. and Tamm, C. (2014), "Capital Structure Changes around Cross-Listings", Corporate Governance in the US and Global Settings (Advances in Financial Economics, Vol. 17), Emerald Group Publishing Limited, Leeds, pp. 1-34.



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