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The main objective of this study was to examine the effects of regional cross-listing on firm value and performance on Kenyan firms. The specific research objectives for this study were: (i) to determine the effect of cross-listing on valuation; (ii) to determine the effect of cross-listing on profitability and growth; (iii) to determine the effect of cross-listing on liquidity and leverage and; (iv) to determine the effect of cross-listing on operational performance. The scope of the study focused on 5 cross-listed firms whose primary listing is the NSE. Thus, conducting a census the study analyzed data from firms? financial statements and the NSE daily market averages and analyzed the firms? value, profitability and growth, liquidity and leverage and, operational performance to examine the differences prior and subsequent to listing. The study conducted a time series analysis, taking into consideration the independence of the variables are concerned with a time series data set, thus sought to examine the evolution of the variables over time using data spanning seven years i.e. three years before cross-listing, the year of cross-listing and three years after cross-listing. The study further subjected the results to a univariate analysis in order to examine the significance of the findings using the paired t-test for the firms Tobin?s Q, liquidity and leverage, profitability and growth and operational performance. Additionally, the findings were also subjected to a correlation analysis to measure the degree of relationship between the variables under study. The results on firm value show that on average the firm value decreased after cross-listing but the results had no statistically significant difference from before and after cross-listing. Tobin?s Q and profitability had a strong correlation indicating that the change in firm value has a strong effect to the changes in the firm profitability. The results from the study on Liquidity and Leverage, using a before and after comparison from the paired t-test revealed that on average the liquidity of the firm increased while as leverage decreased. Additionally, the study also revealed that leverage and liquidity had a moderately negative correlation. Depending on the firm, profitability and growth varied and thus there was no consistent trend evident in the study. However, a before and after comparison of the variables yielded that despite the increase in profitability and growth of the firms, the results had no significant difference. The time series analysis yielded that operational performance of majority of the cross-listed firms? motive by market incentive to cross-list, increased. Jubilee Insurance was the only firm that reported an increase after cross-listing. A before and after comparison yielded that there was a decrease in operational performance but there was no statistical significant difference in the results. Additionally, liquidity and total assets had a weak positive correlation indicating that the changes in leverage does not weakly/does not correlate with the changes in total assets. The study recommends that for firms to sustain their improved firm value and financial performance post-listing, firms should not only comply with the new regulations that they have willingly subjected themselves to but, to take the extra mile to improve corporate governance, improve information disclosure exceeding the bare minimum and creating more value for shareholders.
The authors show that the widening of a foreign firm's U.S. investor base and the improved information environment associated with cross-listing on a U.S. exchange each have a separately identifiable effect on a firm's valuation. The increase in valuation associated with cross-listing is transitory, not permanent. Valuations of Canadian firms peak in the year of cross-listing and fall monotonically thereafter, regardless of the level of U.S. investor holdings or the ownership structure of the firm.
The widening of a foreign firm's U.S. investor base and the improved information environment associated with cross-listing on a U.S. exchange are distinct effects. Valuations of Canadian firms peak in the year of cross-listing and fall monotonically thereafter, irregardless of the level of U.S. investor holdings or the ownership structure of the firm. Cross-listed firms with a 20%+ blockholder attract a similar number of U.S. institutional investors as widely-held firms on average, but experience a lower increase in valuation at high levels of investor recognition. While U.S. investors are less willing to invest in firms with dual-class shares, these firms benefit more from cross-listing even when they fail to widen their U.S. investor base, suggesting that the reduction in information asymmetry between controlling and minority investors has a separate impact on valuation for firms where agency problems are greatest.
It is well known that cross-listing domestic stocks in foreign exchanges has significant valuation effects on the listed company's shares. Using a sample of firms with dual shares, we explore the differential effects of cross-listing on prices and we are able to separate the different sources of the benefits of cross-listing. Our results show that even though the market segmentation and bonding effects are both statistically significant, the economic significance of segmentation is more than double that of bonding. Furthermore, we document an economically and statistically significant increasse in the liquidity of both share classes after the listing. Overall, our results explain why less and less firms are willing to list in the U.S.: Sarbanes Oxley has increased the cost of adopting better governance while its benefits are not substantial; and market segmentation has decreased significantly in the last years.
This study investigates the valuation impact of a firm's decision to cross-list on a more (or less) prestigious stock exchange relative to its own domestic market. We use network analysis to derive broad market-based measures of prestige for forty-five country or regional stock exchange destinations between 1990 and 2006. We find that firms crosslisting in a more prestigious market enjoy significant valuation gains over the five-year period following the listing. We also document a reverse effect for firms cross-listing in less prestigious markets: These firms experience a significant decline in valuation over the five years following the listing. The reputation of the cross-border listing destinations is therefore a useful signal of a firm's value going forward. Our findings are consistent with the view that cross-listing in a prestigious market enhances a firm's visibility, strengthens corporate governance, and lowers informational frictions and capital costs. -- Cross-listings ; network analysis
Diese Master-Arbeit untersucht, wie sich ein Zweitlisting im amerikanischen Kapitalmarkt auf die Bewertung einer Aktie auswirkt. Dazu werden mittels einer Event Study tägliche Renditen während der Bekanntgabe und dem Zeitraum des Listings im U.S.Markt untersucht. Während der Bekanntgabe werden positive abnormale Renditen festgestellt. Während des Zeitraums des Listing hingegen finden sich überdurchschnittliche negative Renditen. Es wird die Hypothese aufgestellt, dass die negativen Renditen mit der Möglichkeit Leerverkäufe zu tätigen zusammenhangen. Frühere Studien fanden Evidenz dass das Verbot von Leerverkäufen zu einer Überbewertung führt. Werden Leerverkäufe zugelassen kann dies zu einem negativen Preiseffekt führen. Die Resultate dieser Studie zeigen zusätzliche Evidenz für dies These.
We analyze firms' choice between exchanges to list their equity (including multiple listings), and exchanges' choice of listing standards for firms which apply for listing, in an environment of competition and co-operation among exchanges. We model an equity market characterized by asymmetric information, where outsiders can reduce their informational disadvantage relative to insiders by producing (noisy) information about firms at a cost. Exchanges are populated by two kinds of investors: sophisticated investors, with a cost advantage in producing information (low-cost investors), and ordinary investors, without such a cost-advantage (high-cost investors); the proportions of these two kinds of investors vary across exchanges. While firms are short-lived agents, exchanges are long-lived, value-maximizing agents, whose stringency in their listing and disclosure standards evolve over time. Exchanges also use their listing standards as a tool in competing with other exchanges for listings by firms. However, outsiders can partially infer the rigor of an exchange's listing policy by studying the subsequent performance of firms which have obtained listing there. The listing standards chosen by an exchange therefore affects its reputation. The listing choices of firms between exchanges, the valuation effects of listings on firm equity, and exchanges' listing standards emerge endogenously in equilibrium. Our model has implications for: the relationship between firm characteristics and the benefits from cross (and dual) listing; the price effects of cross listings; the relationship between cross listing and financial analyst following; the relationship between an exchange's reputation and its listing standards; the impact of competition on an exchange's listing standard; the impact of an alliance between exchanges on the listing standards of the allied exchange and of exchanges competing with it; and for the optimal regulation of exchanges.
The authors describe a new view of cross-listing that links the impact on firm valuation to the firm's ability to develop an active secondary market for its shares in the U.S. markets. Contrary to previous research, cross-listing may not provide benefits for all firms, even when those firms meet the highest regulatory requirements for disclosure and supervision. When cross-listed firms are divided into two groups on the basis of their share turnover in the home market relative to the U.S. market, the firms that develop active trading in the U.S. market experience an increase in valuation. Cross-listed firms that remain predominantly traded in the home market following cross-listing are valued similarly to non-cross-listed firms. To gain the full benefits of cross-listing, a foreign firm must convince investors that their shareholder rights will be protected. The effectiveness of this reputational bonding is witnessed in the amount of trading on the U.S. market relative to the home market.