We examine a primary outcome of corporate governance, namely, the ability to identify and terminate poorly performing CEOs, to test the effectiveness of U.S. investor protections in improving the corporate governance of cross‐listed firms. We find that firms from weak investor protection regimes that are cross‐listed on a major U.S. Exchange are more likely to terminate poorly performing CEOs than non‐cross‐listed firms. Cross‐listings on exchanges that do not require the adoption of stringent investor protections (OTC, private placements, and London listings) are not associated with a higher propensity to remove poorly performing CEOs.

This paper investigates how a foreign firm's decision to cross‐list on a U.S. stock exchange is related to the consumption of private benefits of control by its controlling shareholders. Theory has proposed that when private benefits are high, controlling shareholders are less likely to choose to cross‐list in the United States because of constraints on the consumption of private benefits resulting from such listings. Using several proxies for private benefits related to the control and cash flow ownership rights of controlling shareholders, we find support for this hypothesis with a sample of more than 4,000 firms from 31 countries.