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The Dark Side of International Cross-Listing: Effects on Rival Firms at Home

Author

Listed:
  • Michael Melvin
  • Magali Valero
Abstract
We analyze the stock price impact of firms’ U.S. cross-listing on home-market rival firms. Using an empirical event study approach we find negative cumulative average abnormal returns for the rival firms. The evidence suggests that the dominant effect is that investors see rivals as at a relative disadvantage to the listing firm. As firms cross-list in the US and commit to the increased disclosure and investor protection associated with the US listing, they are better able to take advantage of growth opportunities relative to their non cross-listing counterparts, and this results in negative spillover effects on rival firms.

Suggested Citation

  • Michael Melvin & Magali Valero, 2007. "The Dark Side of International Cross-Listing: Effects on Rival Firms at Home," CESifo Working Paper Series 2174, CESifo.
    • Handle: RePEc:ces:ceswps:_2174
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Wölfle, Marco, 2007. "Price Discovery for Cross-Listed Securities from Emerging Eastern European Countries," ZEW Discussion Papers 07-067, ZEW - Leibniz Centre for European Economic Research.
    2. April M. Knill, 2013. "Does Foreign Portfolio Investment Reach Small Listed Firms?," European Financial Management, European Financial Management Association, vol. 19(2), pages 251-303, March.
    3. Tim Jenkinson & Tarun Ramadorai, 2013. "Does One Size Fit All? The Consequences of Switching Markets with Different Regulatory Standards," European Financial Management, European Financial Management Association, vol. 19(5), pages 852-886, November.
    4. Eichler, Stefan, 2011. "Exchange rate expectations and the pricing of Chinese cross-listed stocks," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 443-455, February.
    5. Mejda Bahlous, 2013. "Does Cross-Listing Benefit the Shareholders? Evidence from Companies in the GCC Countries?," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 20(4), pages 345-381, November.
    6. Carmen Cotei & Joseph Farhat, 2013. "Informational externalities of initial public offerings: Does venture capital backing matter?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(1), pages 80-99, January.

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    More about this item

    Keywords

    cross-listings; rival firms; growth opportunities;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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