Valuation Effects of Termination of Cross-Listings
Journal
Journal of Financial Perspectives
ISSN
2049-8640
Type
journal article
Date Issued
2014
Author(s)
Abstract
In the past, segmentation of capital markets incentivized numerous companies to crosslist in more integrated markets by promising better investor recognition and thereby lowering cost of capital and increasing stock liquidity. In recent years, however, more and more companies have decided to terminate these dual listings. In contrast to previous studies, which mainly focus on the benefits and/or drawbacks of the initial cross-listings, this paper investigates share price effects linked to the termination of cross-listings. A special focus lies on the characteristics of companies' home markets to explain observed price effects. The empirical results show negative abnormal returns on the event date as well as negative cumulative abnormal returns in the weeks following the announcement of the termination of the secondary listing. The absolute value of the price reaction varies positively with foreign investors' difficulty to enter the companies' local market and the fraction of liquidity allocated to the foreign listing prior to the delisting event.
https://ideas.repec.org/a/ris/jofipe/0038.html
https://ideas.repec.org/a/ris/jofipe/0038.html
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
EY Global Financial Services Institute
Publisher place
London
Volume
2
Number
1
Start page
177
End page
193
Pages
17
Subject(s)
Eprints ID
237318