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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 problems…

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. 14 no. 1
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 1 August 1994

Usha R. Mittoo

Evaluation of the foreign listing decision involves many complexities since it impacts a firm's financing, investment, and marketing decisions. In this paper, we identify major…

Abstract

Evaluation of the foreign listing decision involves many complexities since it impacts a firm's financing, investment, and marketing decisions. In this paper, we identify major costs and benefits of foreign listing based on the available evidence and suggest evaluation of the foreign listing decision using an Adjusted Present Value method. We also discuss implications of some recent regulatory changes on the costs and benefits of foreign listing.

Details

Managerial Finance, vol. 20 no. 8
Type: Research Article
ISSN: 0307-4358

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…

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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 cross‐list every year. This paper examines the recent cross‐listing trends and reviews the literature on motives to cross‐list.

Design/methodology/approach

The literature review includes a summary of theoretical studies grouped into cross‐listing 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 cross‐listing theories.

Findings

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

Details

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

Keywords

Article
Publication date: 1 May 2006

Athanasios Koulakiotis, Dimitrios Angelidis, Konstantinos Tolikas and Phil Molyneux

This paper develops the approach suggested by Howe et al. to examine the impact of cross‐listings on stock price volatility in Europe.

Abstract

Purpose

This paper develops the approach suggested by Howe et al. to examine the impact of cross‐listings on stock price volatility in Europe.

Design/methodology/approach

A modified generalized autoregressive conditional hetero‐skedasticity (GARCH) modeling approach as suggested by Li and Engle is used taking into account different regulatory structures across the range of markets using LaPorta et al.'s stock market regulatory classification.

Findings

It is found that information spillover effects are important for the Dutch market for cross‐listed equities and that a different regulatory environment may have a noteworthy impact on symmetric information spillovers.

Research limitations/implications

The focus is 11 cross‐listing equities and on an event window of 12 years. This implies that the results may be biased on the data sample and the length of the period that used.

Practical implications

The findings are important for the shareholders of cross‐listed companies as the various impacts of regulatory differences between markets (as a result of low and high shareholder protection rules) from foreign markets to the Dutch home market are identified.

Originality/value

A primary focus of this paper is to provide a different methodology than the one adopted by Howe et al. using a modified GARCH modeling approach as suggested by Li and Engle, to examine the impact of the cross‐listings of Dutch firms on symmetric volatility spillovers. The analysis also takes into account the influence of different regulatory structures across the range of markets where Dutch firms are cross‐listed. In particular, we use LaPorta et al.'s stock market regulatory classification is used to analyze the magnitude and persistence of symmetric volatility spillovers from the foreign listing to the home equity of cross‐listed companies in the Dutch stock exchange.

Details

Managerial Finance, vol. 32 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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

Keywords

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

Keywords

Article
Publication date: 30 September 2013

Yoon Koh, Seoki Lee, Sudipta Basu and Wesley S. Roehl

– The purpose of this study is to identify determinants of involuntary cross-listing (CL) of US restaurant companies on the Frankfurt Stock Exchange (FSE).

Abstract

Purpose

The purpose of this study is to identify determinants of involuntary cross-listing (CL) of US restaurant companies on the Frankfurt Stock Exchange (FSE).

Design/methodology/approach

The study utilizes a mixed method design with an interview and a pooled logistic regression analysis with panel dataset using the company-clustered standard error to develop and test the hypotheses.

Findings

The empirical investigation identified determinants of involuntary CL by examining ten factors, including size, firm growth opportunities, leverage, financial flexibility, international operation, profitability, overall German economic condition, industry growth opportunities, restaurant type, and local operation. The study found three determinants – large size, favorable economic condition in Germany and positive industry growth opportunities – utilizing the sample that covers the entire periods of involuntary CL of US restaurant companies on the FSE.

Originality/value

This paper uncovers the phenomenon of involuntary CL, which many stock exchanges have strategically adopted by simplifying listing requirements for companies already listed in other stock markets, focusing on US restaurant companies. The number of involuntarily cross-listed US restaurant companies greatly increased to 50 percent of domestically listed US restaurant companies while those companies are largely unaware of the phenomenon. The research advances understanding of involuntary CLs, which previously received little attention.

Details

International Journal of Contemporary Hospitality Management, vol. 25 no. 7
Type: Research Article
ISSN: 0959-6119

Keywords

Article
Publication date: 5 June 2009

Claudia Champagne and Lawrence Kryzanowski

The purpose of this paper is to study the impact of cross‐listing and cross‐listing location on the terms of the private debt of firms not located in the USA. Specifically, the…

Abstract

Purpose

The purpose of this paper is to study the impact of cross‐listing and cross‐listing 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 cross‐listed status of the borrower (cross‐listed 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 cross‐list are examined using the inverse Mill's ratios from a bivariate probit model.

Findings

All else held equal, foreign borrowers that are cross‐listed 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 cross‐listed in the UK. Cross‐listings 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 cross‐listing and capital structure literatures by providing evidence that the net benefit from being cross‐listed 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 cross‐listing and the choice of cross‐listing venues on the terms of private debt issues.

Details

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

Keywords

Article
Publication date: 1 April 2004

Somnath Das, Shahrokh M. Saudagaran and Ranjan Sinha

A number of US firms voluntarily de‐listed their stock from the Tokyo Stock Exchange (TSE) during the years 1977–97. We examine changes in trading volume, return volatility and…

Abstract

A number of US firms voluntarily de‐listed their stock from the Tokyo Stock Exchange (TSE) during the years 1977–97. We examine changes in trading volume, return volatility and implicit bid‐ask spreads in the U.S. stock exchange surrounding the de‐listing, and find evidence of an increase both in trading volume and bid‐ask spreads, particularly when the analysis is conditioned upon (a) trading volume on the TSE prior to de‐listing and (b) whether the de‐listing firm had operations in Japan. We also examine the daily stock price movement of the de‐listed firms and find a significantly negative price movement at the time of the de‐listing announcement, and also around the actual date of de‐listing. The results suggest a negative price response reflecting both a temporary information effect and also a more permanent valuation effect. Preliminary tests suggest that the latter is not related to the decrease in liquidity.

Details

Review of Accounting and Finance, vol. 3 no. 4
Type: Research Article
ISSN: 1475-7702

Article
Publication date: 24 August 2012

Congsheng Wu

Many foreign firms have made their initial public offering (IPO) debuts in the USA, without first being listed in their home market. The purpose of this paper is to investigate…

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Abstract

Purpose

Many foreign firms have made their initial public offering (IPO) debuts in the USA, without first being listed in their home market. The purpose of this paper is to investigate the association of a wide range of country risk measures with the valuation of foreign IPOs.

Design/methodology/approach

Based on the law and finance literature, it is hypothesized that IPO firms domiciled in countries with higher country risk are worth less, other things equal. This hypothesis is tested with a sample of international companies making their IPO debuts in the USA between 1986 and 2002.

Findings

It is found that several commonly used country‐level variables explain the observed IPO valuation differences across countries. In particular, the index of economic freedom, developed by the Heritage Foundation, and the Transparency International's corruption index have a significant impact on post‐offer IPO valuations. Specifically, IPO firms hailing from countries with more economic freedom and less corruption are associated with higher valuation in the aftermarket.

Originality/value

The paper investigates whether some commonly‐used country risk measures affect the valuation of newly US‐listed foreign firms.

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