Working Paper: CEPR ID: DP7308
Authors: Nuno Fernandes; Mariassunta Giannetti
Abstract: Using a sample that provides unprecedented detail on foreign listings, new listings, and delistings for 29 exchanges in 24 countries starting from the early 1980s, we document a growing tendency of listings to concentrate in the U.S. and the U.K. and large changes in all exchanges? ability to attract foreign companies. We highlight the following determinants of these facts. First, during the sample period, investor protection improved in many countries. As investor protection improves in the country of origin, firms become less likely to list in countries with weak investor protection but more likely to list in countries with strong investor protection, especially in the U.K. and the U.S. Second, we show that foreign listings are related to the exchange?s market valuation in the same way as domestic equity issues are and that firms that are more difficult to evaluate are more inclined to list in foreign exchanges with high valuations.
Keywords: cross-listings; investor protection; market timing; SOX
JEL Codes: F40; G15; G38; M41; M45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improvements in corporate governance (G38) | Increased foreign listings (G15) |
| Improvements in investor protection in home country (G38) | Decreased likelihood of listing in exchanges with weak investor protection (G24) |
| Improvements in investor protection in home country (G38) | Increased probability of listing in exchanges with strong investor protection (G18) |
| Adoption of governance codes in origin country (G38) | Decreased likelihood of seeking foreign listings in exchanges with lower investor protection (G24) |
| Firms prone to mispricing (L11) | Increased likelihood of cross-listing in markets with temporarily high valuations (G19) |
| High market valuations (G19) | Increased probability of cross-listing (G19) |