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COMPETITIVE AND INFORMATION EFFECTS OF CROSS-BORDER STOCK LISTINGS
Bruce M.Bradford and Anna D.Martin
Fairfield University
University of Central Florida
Abstract
We examine the effect of 269 cross-border listings on rivals in the
写美国留学论文listing and domestic markets and find that U.S.rivals experience significant gains
whereas domestic rivals do not.Both competitive and information effects areimportant in explaining the reaction of U.S.rivals.Regarding the competitiveeffects,the reaction of rivals is less favorable when listings originate in developedcountries and more favorable when listing firms do not have prior operatingpresence in the United States.Regarding the information effects,the reactionis less favorable when listings are combined with equity offerings and morefavorable when the listing is the first to occur within an industry.
I.Introduction
The globalization of financial markets has resulted in an increasing numberof firms listing their equities on foreign stock exchanges.Although most cross-border listings involve private nongovernmental firms,the pace of listings has beenaccelerated by the growing trend toward privatization.Many governments haveprivatized companies and,in many instances,have raised capital globally by listing
the newly privatized firms overseas.Although there are costs associated with listingoverseas,such as reporting and registration costs,the listing can provide strategic,financial,political,marketing,and operational benefits to the firm(Karolyi 1998).More specifically,cross-border listings can result in improved relations between the
listing firm and host country market participants,improved liquidity of the firm’sThe authors are grateful for the valuable comments provided by the referee,Cheol S.Eun.Any errorsand omissions are the sole responsibility of the authors.399400 The Journal of Financial Research
shares,increased investor recognition,greater prestige for the firm,and improvedaccess to capital.In addition,an overseas listing may reduce the cost of capitalby diversifying the firm’s exposure to various risks and reducing internationalinvestment barriers(Karolyi 1998).
A significant number of cross-border listings have occurred on the U.S.
stock exchanges.We examine the effect of these listings on rivals of the listingfirm in both the listing market(United States)and the domestic market.We drawon previous empirical studies that document that cross-border equity listings haveimplications for the listing firm(e.g.,Alexander,Eun,and Janakiramanan 1988;
Foerster and Karolyi 1993)and on studies that show that a number of events have
implications for both the announcing firm and their rivals(e.g.,Slovin,Sushka,
and Polonchek 1992;Szewczyk 1992).By combining the two sets of studies,we
hypothesize that cross-border listings may have implications for both listing and
rival firms.As a result of the cross-border nature of this study,we examine the
effect of the listing on competitors in both the listing and domestic markets.
Cross-border listings are likely to have a significant effect on rivals for
two reasons.First,previous studies show that rival valuation effects are likely to be
driven by changes in the competitive balance within the industry(e.g.,Lang and
Stulz 1992).We argue that a listing may cause investors to reassess the competitive
position of the listing firm relative to its rivals.Second,we build on previous studies
that