مقاله سال ۲۰۱۶

مجله مدیریت مالی چند ملیتی – Journal of Multinational Financial Management

Over the last few decades, many firms choose to list their shares abroad. This trend has attracted several researchers and international cross-listing has been intensively covered in the literature1 . More particularly, several studies try to understand the benefits of cross-listing by evaluating the value creation after listing abroad2 . However, and in light of the importantdevelopment in cross-listing trend that has taken place in capital markets, the role of crosslisting on value creation remains an open question. This is essentially because a substantial number of firms choose to cross-list their shares in multiple overseas markets.

Our contribution to the existing literature is twofold. First, unlike most previous studies which concentrate on dual-listed stocks, we further consider multiple-listed ones to investigate the effect of additional cross-listing on firm’s value. In our knowledge, only You et al. (2013) have analyzed this question. The authors use a sample which was mainly dominated by the presence in Germany as a foreign market destination and conclude that firms cross-list their shares in additional foreign market to benefit from higher valuation and better legal environment for investors. As pointed out by Wang and Zhou (2015), more than 5,000 firm’s shares are traded in the Germany open market. Here, it is important to distinguish between cross-listing and cross-trading. The two types of foreign presence make a firm’s stock accessible to foreign investors. However, cross-listing is different from cross-trading in the way that it is initiated by the company’s decision to cross-list its shares on a foreign market and involves a company meeting listing and disclosure requirements of the host foreign stock exchange. A firm is cross-traded when it is admitted to trade on a foreign stock market without meeting the stock exchange’s disclosure and listing requirements and often company are not aware that their shares are traded abroad. Given these differences between crosslisting and cross-trading, and when cross-traded stocks are included in the sample, results cannot be interpreted as evidence that explain the motivation for cross-listing and some explanations for possible value creation after cross-listing, such as the investor protection hypothesis, cannot be considered. In this study, Germany is excluded from foreign listing destinations in our sample because it is important to distinguish between cross-listed stocks and cross-traded ones, and consequently our analysis will produce better understanding on the role of additional cross-listing on value creation. In addition, our paper tries to examine if this role can vary across foreign listing destinations. In fact, the existing literature indicated that the benefits from cross-listing are affected by the economic, financial, legal and regulatory environment of the host market. Despite the fact that little attention was given to world markets other than the US where the institutional characteristics are significantly different, some empirical evidence show that the US does not offer the unique valuation benefit (Bianconi and Tan, 2010; Roosenboom and Van Dijk, 2009; Sarkissian and Schill, 2009; Serra, 1999). Our second contribution is to analyze another source of value creation after cross-listing. Several empirical evidences show that valuation gain after cross-listing is due to the overcome of market segmentation (Abdallah and Ioannidis, 2010; Foerster and Karolyi, 1999; Hail and Leuz, 2009; Miller, 1999; Roosenboom and Van Dijk, 2009), to better legal environment (Doidge et al., 2004; Doidge et al., 2009; Hail and Leuz, 2009) to higher stock liquidity (Foerster and Karolyi, 1999) and also to proximity preference (Sarkissian and Schill, 2009). One branch in the literature shows that cross-listing improves the informativeness of stock prices (Fernandes and Ferreira, 2008; Ghadhab and Hellara, 2016). Therefore, whether value gain after cross-listing is related to the improvement in stock price informativeness is an interesting question that needs to be investigated since it is well known in the literature that stock prices affect capital allocation (Chen et al., 2007; Durnev et al., 2004). Foucault and Gherig (2008) show that cross-listing enhances stock price informativeness and hence managers make better investment decision. Thereby, firms with high growth opportunities choose to cross-list their shares abroad and exhibit higher valuation than firms that do not cross-list. Our paper provides the first direct empirical evidence for this prediction and tries to test if positive price reaction after cross-listing and after each additional cross-listing is positively related to the level of stock price informativeness measured by firm-specific return variation. Moreover, Ghadhab and Hellara (2016) empirically show that cross-listing in the  US is more beneficial than cross-listing in major European exchanges in that US exchanges contribute more to price discovery of firms listed abroad and consequently provide more efficient stock prices. Based on this result, we try to investigate if the explanatory power of stock price informativeness in value creation varies across foreign listing exchanges.

Using a sample of 303 firms with 499 cross-listings over the period 1980-2013, we show that value creation occurs after cross-listing. However, additional cross-listing lead to lower positive price reaction. Empirical results also show the dominant role of US and UK exchanges in value creation compared to other world exchanges. On multivariate regressions, we find new empirical evidence that stock price informativeness is the mainly responsible factor that strongly explains positive price reaction after cross-listing. We also find similar results when we control for endogeneity concern.