Has New York become less competitive than London in global markets? Evaluating foreign listing choices over time

By Craig Doidge, G. Karolyi, René M. Stulz. 2009

293 citations recorded by the source corpus.

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 in 2002. We find that cross-listings have been falling on US exchanges as well as on the Main Market in London. This decline in cross-listings is explained by changes in firm characteristics instead of by changes in the benefits of cross-listing. We show that after controlling for firm characteristics there is no deficit in cross-listing counts on US exchanges related to SOX. Investigating the valuation differential between listed and non-listed firms (the cross-listing premium) from 1990 to 2005, we find that there is a significant premium for US exchange listings every year, that the premium has not fallen significantly in recent years, and that it persists when allowing for time-invariant unobservable firm characteristics. In contrast, no premium exists for listings on London's Main Market in any year. Firms increase their capital-raising activities at home and abroad following a cross-listing on a major US exchange but not following a cross-listing in London. Our evidence is consistent with the theory that an exchange listing in New York has unique governance benefits for foreign firms.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/61513742fbfa3272e2bf43ecba45fbfc817e8c70

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Citations in the corpus

Cross-Listing, Investment Sensitivity to Stock Price, and the Learning Hypothesis (2012, background): “Cross-listed firms benefit from a lower cost of capital (e.g. Hail and Leuz (2009), or Ball, Hail, and Vasvari (2009)) and raise more external funds after they enter the U.S. markets (e.g. Reese and Weisbach (2002), Lins, Strickland, and Zenner (2005), or Doidge, Karolyi, and Stulz (2009)).”
The market reaction to cross-listings: Does the destination market matter? (2009, methodology): “Motivated by Doidge et al. (2009), we create two dummy variables measuring the percentage of closely-held shares and use them as firm-level proxies for investor protection concerns related to the concentration of ownership.”
The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research (2015, background): “In addition, there are studies on foreign firms’ tendency to enter and raise capital on U.S. debt and equity capital markets (e.g., Piotroski and Srinivasan, 2008; Doidge et al., 2009; Gao, 2011).”
Post-listing performance and private sector regulation: The experience of London's Alternative Investment Market $ (2013, unknown): “Piotroski and Srinivasan (2008) and Doidge et al. (2009) provide empirical evidence on the cross-listing choices by non-US, nonUK firms to address the question of whether the US lost listings to the UK markets due to SOX.”
Audit Quality and Corporate Governance: Evidence from the Microfinance Industry (2012, unknown): “Furthermore, consistent with a published finding that foreign owners require more credible financial statements to reduc agency costs (Guedhami et al., 2009), Leuz et al. (2009) find that foreigners avoid investments in poorly governed firms (cf. Doidge et al., 2009).”
Europe's Second Markets for Small Companies (2012, unknown): “However, as Doidge et al. (2009) demonstrate, it is incorrect to interpret the success of the AIM as evidence of a decline in the attractiveness of US exchanges.”
Global Accounting Convergence and the Potential Adoption of IFRS by the U.S. (Part I): Conceptual Underpinnings and Economic Analysis (2010, background): “2005; Doidge et al. 2009; Piotroski and Srinivasan 2008 .”
Different approaches to corporate reporting regulation: How jurisdictions differ and why (2010, background): “But it also demonstrates that not all firms (or controlling insiders) find stricter commitments beneficial (e.g., Leuz and Oberholzer-Gee, 2006; Doidge et al., 2009b).”
New institutional accounting and IFRS (2011, unknown): “While recent research disputes this claim (e.g. Piotroski and Srinivasan 2008, Doidge et al. 2009), this discussion highlights that it can be important for regulators to consider the consequences of disclosure regulation on firms’ cross listing behaviour and that stringent disclosure regulation can…”
Where Have All the IPOs Gone (2013, unknown): “Furthermore, relatively few U.S. ﬁrms have chosen to go public abroad (Caglio, Hanley, and Marietta-Westberg ((2012), Table III)), and foreign listings have not been disproportionately affected (Doidge, Karolyi, and Stulz ((2009), Table 7)).”