Recent theoretical work on mild segmentation suggests that tests of dual listing should be conducted as joint tests: (a) a test of changes in market integration that may affect asset returns through investors portfolio reallocations as the choice set changes, and (b) a test of changing risk premium/information effects. Previous empirical studies on common stocks have been unable to identify significant positive abnormal returns associated with international listing. However, such studies have not formally tested for changes in market integration through time. In addition, they have not examined announcement dates, which should be the focal point in testing for valuation effects. Unlike previous studies, our analysis concentrates on both the period surrounding the earliest public announcements by Canadian companies of their intentions to seek a US listing for their common shares on the NYSE, AMEX, or NASDAQ as well as the date of US listing during the period 1985–96. This period encompasses significant changes in the regulatory environment which might be perceived to enhance the integration of the two markets. Relying on a conditional asset pricing model subject to time-varying volatility, the results of this study fail to support the view that market integration has increased between the Canadian and US stock markets over the 1985–96 period. The significantly positive announcement effects of Canadian stock listings in the US stock market are consistent with the view that the two markets remain mildly segmented despite the elimination of several institutional changes that should have enhanced capital market integration between the two stock markets. Our evidence also implies that firms operating in mildly segmented capital markets can attain a lower risk premium through international stock listings.

In this paper, we examine how uncertainty about risk, based on firm estimates of volatility of implied volatility (VIV) affects mergers and acquisitions. We show that uncertainty about risk, captured by firm estimates of volatility of implied volatility (VIV) affects both bidder and target announcement returns and the method of payment. For high-risk firms, bidder firm VIV negatively effects the likelihood of a cash-only offer. For low-risk firms, bidder firms (target firms) VIV negatively (positively) affects bidder firm's announcement returns. Target announcement returns for low-risk firms are negatively related to bidder firm VIV. When we control for the volatility level using firm estimates of average implied volatility, VIV effects on announcement returns are sustained. However, average volatility effects subsume bidder firm VIV effects on the method of payment. Furthermore, high risk bidder firms revise their offer price upward with an increase in bidder VIV for non-cash offers.

We provide evidence that the impact of the investment horizon of institutional investors on the credit risk of U.S. industrial firms is both statistically and economically significant. Ceteris paribus, a one percent point increase in the ownership by short-term (long-term) institutions leads to a 0.188 (.046) percentage point decrease (increase) of a firm’s credit spread during 2001–2011. However, during the financial crisis period of 2007/08, long-term institutional investors tend to reduce a firm’s credit risk, especially when a firm’s risk profile is high. Hence, long-term institutions play an important role in enhancing financial stability during the crisis period by mitigating risk.