RFS Advance Access published online on May 13, 2008
Review of Financial Studies, doi:10.1093/rfs/hhn050
The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation
International Department, Bank of Canada
Rotman School of Management, University of Toronto
Address correspondence to Michael R. King, International Department, Bank of Canada, 234 Wellington, Ottawa, Ontario K1A 0G9, Canada; telephone: (613)-782-8672; e-mail: mking{at}bankofcanada.ca
JEL Classification: G12, G15
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Abstract |
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We show that investor recognition and bonding associated with a U.S. cross-listing are distinct effects using a sample of Canadian firms. In contrast to the post-listing decline documented in the literature, we find that cross-listed firms with a single class of shares enjoy a permanent increase in valuation if they attract and maintain investor recognition over time. Valuations of firms that fail to widen their U.S. shareholder base return to pre-listing levels within two years. Cross-listed firms with dual-class shares exhibit a permanent increase in valuation regardless of the level of U.S. investor holdings, consistent with firm-level bonding.
We wish to thank the editor Joel Hasbrouck, Jeffrey Callen, Craig Doidge, Steve Foerster, Cally Jordan, Scott Hendry, Ole-Kristian Hope, Andrew Karolyi, Christian Leuz, Karl Lins, Albert Menkveld, Usha Mittoo, Pamela Moulton, Eric Santor, Michael Schill, Tim Simin, Dan Weaver, Jonathan Witmer, and an anonymous referee for their comments and suggestions. Comments from seminar participants at the 2006 Northern Finance Association, the 2005 Southwestern Ontario Finance Symposium, Darden Business School, HEC Paris, Vrije University, University of Toronto, University of Alberta, Toronto Stock Exchange, Ontario Securities Commission, New York Stock Exchange, CIRANO, and the Bank of Canada are also appreciated. All remaining errors are our own. Data for this project were made available by the NYSE and NASDAQ.