Working Paper: NBER ID: w13079
Authors: Craig Doidge; G. Andrew Karolyi; Rene M. Stulz
Abstract: We study the determinants and consequences of cross-listings on the New York and London stock exchanges from 1990 to 2005. This investigation enables us to evaluate the relative benefits of New York and London exchange listings and to assess whether these relative benefits have changed over time, perhaps as a result of the passage of the Sarbanes-Oxley Act of Congress (SOX) in 2002. We find that cross-listings have been falling on U.S. exchanges as well as on the Main Market in London. This decline in cross-listings is explained by changes in firm characteristics rather than by changes in the benefits of cross-listings. We show that, after controlling for firm characteristics, there is no deficit in cross-listing counts on U.S. exchanges related to SOX. Investigating the cross-listing premium from 1990 to 2005, we find that there is a significant premium for U.S. exchange listings every year, that the premium has not fallen significantly in recent years, that it persists even when allowing for unobservable firm characteristics, and that there is a permanent premium in event time. In contrast, there is no premium for London listings for any year. Cross-listing in the U.S. leads firms to increase their capital-raising activity at home and abroad while a London listing has no such impact. Our evidence is consistent with the theory that an exchange listing in New York has unique governance benefits for foreign firms. These benefits have not been seriously eroded by SOX and cannot be replicated through a London listing.
Keywords: crosslistings; New York Stock Exchange; London Stock Exchange; Sarbanes-Oxley Act; foreign listings
JEL Codes: F30; G15; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| crosslistings on U.S. exchanges (G15) | changes in firm characteristics (D21) |
| SOX legislation (G38) | crosslisting counts on U.S. exchanges (G15) |
| U.S. exchange listings (N22) | capital-raising activities at home and abroad (F21) |
| U.S. exchange listings (N22) | unique governance benefits (G38) |
| London listings (G19) | no premium (Y70) |
| SOX compliance costs (G38) | deter foreign firms from listing in New York (F23) |