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Article
Publication date: 6 September 2013

Olga Dodd

Financial markets’ integration and technological advances in equity trading may have reduced the potential benefits from listing a firm's shares on a foreign exchange…

Abstract

Purpose

Financial markets’ integration and technological advances in equity trading may have reduced the potential benefits from listing a firm's shares on a foreign exchange. Nevertheless, a significant number of firms continue to crosslist every year. This paper examines the recent crosslisting trends and reviews the literature on motives to crosslist.

Design/methodology/approach

The literature review includes a summary of theoretical studies grouped into crosslisting theories including market segmentation, liquidity, investor recognition, information disclosure, legal bonding, proximity preference and business strategy theories, and also includes a discussion of testable implications and empirical evidence for each of the above mentioned crosslisting theories.

Findings

An extensive crosslisting literature offers a number of theories on the motives to crosslist that in most cases complement each other by encompassing different aspects of the complex crosslisting behavior. Nevertheless, continuous market developments, such as significant regulatory and technological changes in the ways capital markets operate, raise new questions on why firms crosslist and call for further research to continue.

Details

Review of Behavioural Finance, vol. 5 no. 1
Type: Research Article
ISSN: 1940-5979

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Book part
Publication date: 14 November 2014

Min-Yu (Stella) Liao and Chris Tamm

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…

Abstract

Purpose

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.

Methodology

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.

Findings

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.

Details

Corporate Governance in the US and Global Settings
Type: Book
ISBN: 978-1-78441-292-0

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Article
Publication date: 9 August 2018

Min-Yu (Stella) Liao

The purpose of this paper is to investigate the effect of cross-listing on the size and structure of director compensation at individual director level. While much of the…

Abstract

Purpose

The purpose of this paper is to investigate the effect of cross-listing on the size and structure of director compensation at individual director level. While much of the prior literature has focused on executive compensation, more recent literature has started to examine director compensation. Additionally, there has been extensive literature examining the impact of cross-listing on the corporate governance and equity valuation of listed firms. The literature, however, has largely ignored the effect of cross-listing on director compensation schemes. This study attempts to combine these two literature streams and examine the effect of cross-listing on director compensation.

Design/methodology/approach

This study uses American Depository Receipts (ADRs) and matched non-ADRs from the same country and industry to test the relationship between cross-listing and director compensation. Regressions with country, year and industry fixed-effects are employed. The relationship is further examined using only ADR firms during pre-listing and post-listing periods.

Findings

This study finds that directors of ADR firms receive higher total compensation and greater percentage equity-based compensation relative to directors of non-ADR firms. This study also finds that such differences in director compensation are dependent on the cross-listing program a firm is registered to. Directors of ADR firms also receive higher total compensation and greater percentage equity-based compensation during post-listing periods relative to their own compensation during pre-listing periods.

Originality/value

This study extends the literature on director compensation in a global setting, and is the first to examine an unanswered question regarding the effect of cross-listing on director compensation. This study provides important information that cross-listing affects the size and structure of director compensation between ADR and non-ADR firms, as well as between pre-listing and post-listing periods for ADR firms themselves.

Details

Managerial Finance, vol. 44 no. 9
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 7 August 2017

Kim Hin David Ho, Kwame Addae-Dapaah and Fang Rui Lina Peck

The purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs).

Abstract

Purpose

The purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs).

Design/methodology/approach

The paper adopts the event study methodology to assess the abnormal returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets are examined, via a modified two-factor international asset pricing model. A comparison is made for two broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts from institutional differences.

Findings

Cross-listed REITs generally experience positive and significant ARs throughout the event window, implying significant superior returns associated with the cross-listing for REITs. On systematic risks, REITs exhibit significant decline in their domestic market β coefficients after the cross-listing. However, the foreign market β coefficients do not yield conclusive evidence when compared across the sample.

Research limitations/implications

Results are consistent with prudential asset allocation for potential diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant than changes in the foreign market beta.

Practical implications

The results and findings should incentivise REIT managers to explore viable cross-listing.

Social implications

Such cross-listing for REITs should enhance risk diversification.

Originality/value

This is a pioneer study on cross-listing of REITs. It provides a basis for investment decision making, and could provoke further research and discussion.

Details

Journal of Property Investment & Finance, vol. 35 no. 5
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 24 February 2012

Li Li Eng and Qianhua (Q) Ling

The purpose of this paper is to examine whether both country disclosure environment and firm‐level disclosures are associated with crosslisting in the USA or London or otherwise.

Abstract

Purpose

The purpose of this paper is to examine whether both country disclosure environment and firm‐level disclosures are associated with crosslisting in the USA or London or otherwise.

Design/methodology/approach

The authors test the association using a sample of Asia‐Pacific firms covered in the Standard and Poor's, 2001/2002 disclosure survey, capturing the country‐level disclosure using the Center for International Financial Analysis and Research (CIFAR) score. The firm‐level disclosure is measured using the S&P disclosure score. The authors conduct a logistic regression analysis and a two‐stage least squares analysis to examine whether the outcome, crosslisting or not, is associated with the country disclosure environment and firm‐level disclosures.

Findings

The authors find that Asia‐Pacific firms from weak disclosure environments and having higher firm‐level disclosure scores are more likely to seek listing in the USA. Further, the paper provides initial evidence that these Asia‐Pacific firms are as likely to seek listing in London as in the USA. No significant difference was found in S&P scores between US and London crosslistings after controlling for the effects of other variables. This suggests that firms that crosslist in London present similar disclosure levels to firms that crosslist in the USA.

Originality/value

The paper's findings contribute to the crosslisting literature on disclosure by showing that the interaction between firm‐level disclosure and country‐level disclosure has an impact on whether a firm crosslists in the USA/London or not. The authors' comparison of US crosslistings versus London crosslistings provides the first evidence that disclosures of US and London crosslistings are not significantly different.

Details

International Journal of Accounting & Information Management, vol. 20 no. 1
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 7 December 2015

Min-Yu (Stella) Liao and Stephen Ferris

When a foreign firm cross-lists on an exchange in the US, it signals stronger investor protection. This is because cross-listing firms must comply with SEC and exchange…

Abstract

Purpose

When a foreign firm cross-lists on an exchange in the US, it signals stronger investor protection. This is because cross-listing firms must comply with SEC and exchange regulations, thus producing stronger corporate governance. Consequently, cross-listing increases firm attractiveness to investors and places domestic rivals at a disadvantage. Rivals might respond by mimicking the governance changes resulting from cross-listing. The purpose of this paper is to examine whether firms respond to their rivals’ cross-listings through improvement in governance.

Design/methodology/approach

This study uses earnings management as a measure of governance for a set of international firms. The authors track the changes in governance of non-cross-listing firms following their rivals’ cross-listings. The authors employ an event study methodology to assess the spillover effect of a competitor’s cross-listing.

Findings

The authors find that rivals exhibit imitative improvements in their governance following a competitor’s cross-listing. This response is immediate and is the strongest in the year of cross-listing. Further, rivals with greater growth opportunities, lower market share, stronger past performance, and larger size demonstrate greater improvements in governance. Rivals make greater improvements in response to more rigorous Level III listings.

Practical implications

This study finds that cross-listing effects are underestimated. It is not only the investors of the listing-firms who benefit from the cross-listing, but also the investors of non-listing rival as competitors try to match the higher governance standard.

Originality/value

This study is the first that examines the intra-industry spillover effect of a cross-listing. This study also expands the analysis of the spillover effect in a new dimension: corporate governance.

Details

Managerial Finance, vol. 41 no. 12
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 5 June 2009

Claudia Champagne and Lawrence Kryzanowski

The purpose of this paper is to study the impact of crosslisting and crosslisting location on the terms of the private debt of firms not located in the USA…

Abstract

Purpose

The purpose of this paper is to study the impact of crosslisting and crosslisting location on the terms of the private debt of firms not located in the USA. Specifically, the paper examines the empirical relationship between three syndicated loan terms (pricing, maturity and amount) at loan initiation and the crosslisted status of the borrower (crosslisted in the USA, UK, through depository receipts or not at all), while (not) differentiating between the stage of economic development of the borrower's home country.

Design/methodology/approach

The three loan terms are modeled as a simultaneous system of equations and are estimated on a very extensive sample of 3,883 observations. The impact of endogeneity biases due to the sequential choices to and where to crosslist are examined using the inverse Mill's ratios from a bivariate probit model.

Findings

All else held equal, foreign borrowers that are crosslisted directly in the UK obtain loans with higher spreads, longer maturities and larger loan amounts if they are from economically developed countries. Borrowers from emerging economies pay lower spreads but receive shorter maturities on syndicated loans if crosslisted in the UK. Crosslistings in the USA are not associated with any significant differential impacts on the three loan terms.

Originality/value

This paper makes an important contribution to the crosslisting and capital structure literatures by providing evidence that the net benefit from being crosslisted for one debt component of the cost of capital (i.e. syndicated loans) depends on the listing destination and upon whether or not the borrower is from an emerging economy. The paper provides practical guidance to corporate financial officers on the benefits of international crosslisting and the choice of crosslisting venues on the terms of private debt issues.

Details

Managerial Finance, vol. 35 no. 7
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 2 October 2019

Shiheng Wang and Serena Wu

The purpose of this paper is to examine two channels through which accounting standard differences could affect cross-listing: compliance costs and/or comparability benefits.

Abstract

Purpose

The purpose of this paper is to examine two channels through which accounting standard differences could affect cross-listing: compliance costs and/or comparability benefits.

Design/methodology/approach

The authors use two settings to disentangle the two channels. First, financial reporting requirements are more stringent for cross-listings via direct listings than cross-listings via depositary receipts; as a result, the effect of compliance costs (if any) would be manifested differently in the two venues of cross-listings. Second, some host countries allow foreign firms to report under International Financial Reporting Standards (IFRS) without mandating IFRS for domestic firms; compared to host countries that mandate IFRS for both domestic and foreign firms, these IFRS-permitting countries provide a setting to test the importance of comparability benefits while holding constant compliance costs.

Findings

The authors find that prior to IFRS adoption, direct listings decrease with accounting standards differences between two countries while depositary receipts increase with such differences, consistent with the costs of complying with host country’s accounting standards affecting firms’ cross-listing decisions. After the harmonization of accounting standards, the authors find that IFRS-mandating host countries gain cross-listings from other IFRS-mandating jurisdictions, while IFRS-permitting countries do not experience such gains. These combined results suggest that accounting related compliance costs and comparability benefits both influence cross-listing decisions.

Originality/value

The paper employs unique settings that enable an in-depth examination of the role of compliance costs vs that of comparability benefits on cross-listing decisions. The settings employed by the authors allow them to disentangle the two channels and provide an important insight that accounting standard-related compliance costs and comparability benefits both affect cross-listing decisions.

Details

Asian Review of Accounting, vol. 27 no. 4
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 27 July 2021

Mariam Jamaleh and Abha Shukla

Financial internationalization is of particular importance to emerging country firms. Its significance arises from the impact of institutional void and related agency…

Abstract

Purpose

Financial internationalization is of particular importance to emerging country firms. Its significance arises from the impact of institutional void and related agency problems (common to emerging markets) on the internationalization path of these firms. Building on concepts from international finance, agency theory and institutional theory, this paper aims to examine the main aspects of financial internationalization by emerging country multinationals, namely, cross-listing, foreign ownership and foreign independent directors.

Design/methodology/approach

This paper follows a multiple case study approach which is a good fit for the exploratory nature of this research. The interest is to examine the context-driven financial internationalization of each case firm and replicate the firm-level information to find a common strategy.

Findings

The findings suggest that financial internationalization by emerging country multinationals starts mainly as these firms plan to enter advanced country markets. It is a dynamic process that entails interaction between financial internationalization and real internationalization, as well as among different aspects of financial internationalization. Cross-listing comprises the first stage of the process. Then, foreign ownership, particularly foreign institutional investments, would increase gradually in response to advances in financial and factor markets. Recruiting foreign independent directors seems to be adopted last, possibly out of fear of losing control of strategic decisions.

Originality/value

This paper presents a unique perspective that delineates different stages of the process of financial internationalization by emerging country multinationals. This complements the efforts to explain the distinct path of internationalization followed by these firms and supplements scarce literature by including emerging multinationals from India where the matter has not yet attracted proper attention.

Details

Qualitative Research in Financial Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1755-4179

Keywords

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Book part
Publication date: 30 April 2008

Shaw Chen, Bing-Xuan Lin, Yaping Wang and Liansheng Wu

The effectiveness of corporate governance is a major factor in forecasting firm performance. We examine the relationships among cross-listing, corporate governance and…

Abstract

The effectiveness of corporate governance is a major factor in forecasting firm performance. We examine the relationships among cross-listing, corporate governance and firm performance for a sample of Chinese cross-listed companies. We show that cross-listed firms display higher overall quality of corporate governance compared to non-cross-listed firms. Consequently better corporate governance results in higher operating performance. Our results support the bonding hypothesis of cross-listing. Furthermore, we also illustrate that the cross-listing status encapsulates the higher quality of corporate governance that leads to higher operating performance. When forecasting performance of cross-listing companies, it is therefore important to recognize the substitute effect between cross-listing and corporate governance.

Details

Advances in Business and Management Forecasting
Type: Book
ISBN: 978-0-85724-787-2

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