Review of Financial Studies Vol. 22 No. 6 2009
The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation
Abstract
The authors show that the widening of a foreign firm's U.S. investor base and the improved information environment associated with cross-listing on a U.S. exchange each have a separately identifiable effect on a firm's valuation. The increase in valuation associated with cross-listing is transitory, not permanent. Valuations of Canadian firms peak in the year of cross-listing and fall monotonically thereafter, regardless of the level of U.S. investor holdings or the ownership structure of the firm. Cross-listed firms with a 20 per cent or more blockholder attract a similar number of U.S. institutional investors as widely held firms, on average, but experience a lower increase in valuation at high levels of investor recognition. While U.S. investors are less willing to invest in firms with dual-class shares, these firms benefit more from cross-listing even when they fail to widen their U.S. investor base, suggesting that the reduction in information asymmetry between controlling and minority investors has a separate impact on valuation for firms where agency problems are greatest.
- DOI
- 10.1093/rfs/hhn050
- Volume
- 22
- Issue
- 6
- Pages
- 2393-2421
- Language
- en
- Sources
- crossref openalex