RFS Advance Access published online on March 2, 2008
Review of Financial Studies, doi:10.1093/rfs/hhn003
Are there permanent valuation gains to overseas listing?
Faculty of Management, McGill University
Darden Graduate School of Business, University of Virginia
Address correspondence to: Sergei Sarkissian, McGill University, Faculty of Management, Montreal, H3A1G5, Canada; telephone: (514) 398-4876; fax: (514) 398-3876; e-mail: sergei.sarkissian{at}mcgill.ca and Michael J. Schill, University of Virginia, Darden Graduate School of Business, Charlottesville, VA 22906, USA; telephone (434) 243-7736; fax: (434) 243-7676; e-mail: schill{at}virginia.edu.
JEL Classification: G14, G15
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Abstract |
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This paper tests whether foreign equity listings are associated with permanent valuation gains and examines how market and firm characteristics influence any valuation effects. Using a global sample of 1,676 listings placed in 25 countries, we find that much of the valuation gains to overseas listings are not permanent. The transitory nature of valuation gains holds for both average US listings and average first-time firm listings. We find little evidence of a permanent effect on returns for firms that list abroad, even for firms’ listings in markets that are more liquid, provide better legal protection, or have a larger shareholder base.
We thank Joshua Coval, Protiti Dastidar, Ozgur Demirtas, Bernard Dumas, Vihang Errunza, Vihan Goyal, Joel Hasbrouck (editor), Karen Lewis, Erik Lie, Andrew Karolyi, Michael King, Darius Miller, Vijay Singal, Jordan Siegel, Wanda Wallace, Francis Warnock, and two anonymous referees for comments and suggestions. This paper also benefited from the feedback of participants of FMA-2002, NFA-2003, EFA-2004, and WFA-2005 meetings, the 2005 Wharton Conference on Cross-Border Equity Issuance and Trading, as well as workshops at Binghamton University, College of William & Mary, Harvard University, HEC-Montreal, McGill University, Ohio State University, Queen's University, and Virginia Tech. Olivier Khatchadourian and Rich Nelson provided valuable research assistance. Sarkissian acknowledges financial support from IFM2 and SSHRC. Schill acknowledges financial support from the Darden School Foundation.