We examine the determinants of price discovery for Canadian firms cross-listed on the main US stock exchanges over the period 1996–2011. Sampling at a one-minute frequency, we compute Gonzalo and Granger Component Shares (CS) and employ a system GMM approach to control for persistence in price discovery and endogeneity between CS and its determinants. We find that price discovery is highly persistent and that there is strong evidence of simultaneity between CS and its determinants. We conclude that lower relative spreads and higher relative trading activity increase an exchange’s contribution to price discovery. We also document that it is small trades that drive price discovery, particularly since the introduction of decimalization.

We investigate the informational risk and price efficiency of Chinese firms undertaking a foreign IPO on the Hong Kong stock exchange between 1996 and 2012. Specifically, using intraday tick data, we examine the spreads, asymmetric information component of the bid-ask spread, autocorrelations of intraday returns, variance ratios and return predictability of the order flow for foreign IPO firms. We contrast these measures against those of comparable IPO firms on both the Chinese stock exchanges and the Hong Kong stock exchange matched based on the year of IPO, industry and firm size. We find that while the foreign IPO firms largely operate in China, they are generally perceived as having a similar level of information asymmetry and price efficiency as Hong Kong IPO firms. In contrast, IPOs on the Chinese exchanges have much higher proportions of information asymmetry in their spreads and lower price efficiency than foreign IPO firms. Our findings are generally robust to the use of the Heckman two-stage procedure that controls for potential self-selection bias. Our results provide further evidence that it is the location of trading that is important for pricing of firms rather than the location of their business.

This paper studies the dynamics of price discovery for markets with bilateral cross-listings. Using a sample of four Australian stocks cross-listed in New Zealand and five New Zealand stocks cross-listed in Australia for the period January 2002 to December 2007, we assess Hasbrouck (1995) information shares and Grammig et al. (2005) conditional information shares over time. We observe that in both cases the home market is dominant in terms of price discovery. However, when studying price discovery over time, we find that the importance of the Australian market (the larger of the two markets) is increasing for both Australian and New Zealand domiciled firms. Finally, using panel regression analysis, we find that the growth in the importance of the Australian market is positively related to the growth in the size of the firm and negatively related to the size of the percentage spread in the Australian market, implying that as firms grow larger and their cost of trading in Australia declines, the Australian market becomes more informative.

In this paper, we examine the role of national culture in corporate takeover decisions, by arguing that managerial risk tolerance (a combination of risk aversion and risk perception), at the national level, is a cultural trait and affects the expected net synergies CEOs require. We propose a theoretical framework that links CEO risk tolerance to the expected net synergies. We empirically show that CEOs of firms located in countries with lower levels of risk tolerance, measured by Hofstede’s (1980, 2001) uncertainty avoidance score, require higher premiums on takeovers, and show that uncertainty avoidance plays a greater role in relatively large takeovers. Additional testing reveals that CEOs from high uncertainty avoiding nations engage less in cross-border/cross-industry takeovers, suggesting that uncertainty avoidance captures more the CEO’s risk perception than his/her risk aversion.