Working Paper: CEPR ID: DP8331
Authors: Thierry Foucault; Laurent Fresard
Abstract: We show that the sensitivity of corporate investment to stock price is higher for firms cross-listed in the U.S. than for firms that never cross-list. This difference is strong, does not exist prior to the cross-listing date, and does not vanish over time after this date. Moreover, the impact of a U.S. cross-listing on the investment-to-price sensitivity is stronger for firms that rank high on measures of governance quality, which suggests that our finding is not primarily driven by the improvement in corporate governance associated with a U.S cross-listing. Instead, we argue that a cross-listing enhances managers? reliance on stock prices because it makes stock prices more informative to managers. In support of this learning hypothesis, we find that the positive impact of a U.S. cross-listing on the investment-to-price sensitivity is higher when a cross-listing is more likely to stimulate trading based on information new to managers.
Keywords: crosslisting; investment-to-price sensitivity; managerial learning; price informativeness
JEL Codes: G14; G15; G31; G39
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US crosslisting (N22) | investment sensitivity (G11) |
| US crosslisting (N22) | price informativeness for managers (G14) |
| price informativeness for managers (G14) | investment sensitivity (G11) |
| US crosslisting (N22) | investment sensitivity (stronger with better governance) (G38) |
| crosslisting stimulates trading based on new information (G14) | investment sensitivity (G11) |