Trading company shares at multiple stock exchanges. Costs and Benefits of U.S. cross-listings

Table of Contents

1. Introduction

1.1 Hypothesis

1.2 Outline of the paper

1.3 Definition

1.4 Reasons to cross-list

1.4.1The bonding hypothesis

1.4.2 The market segmentation hypothesis

1.4.3. Investor Recognition Hypothesis

1.4.4. The liquidity hypothesis

2. Method

3. Description

4. Summary

5. Conclusion

Research Objectives and Topics

The thesis investigates whether empirical evidence supports the hypothesis that companies from developed countries with well-functioning capital markets experience a decline in the benefits traditionally associated with cross-listing in the United States, particularly following the introduction of less stringent deregistration rules in 2007.

• Analysis of cross-listing motivations (bonding, market segmentation, investor recognition, and liquidity).
• Evaluation of the impact of the Sarbanes-Oxley Act of 2002 on foreign listings in the U.S.
• Statistical examination of the trend in foreign listings from developed versus emerging economies.
• Assessment of the cost-benefit trade-off for firms maintaining U.S. stock exchange listings.
• Investigation of the reasons cited by major European companies for voluntary delisting.

Excerpt from the Book

Summary of Chapters

1. Introduction: Outlines the historical motivations for cross-listing and introduces the core research hypothesis regarding the declining benefits for firms from developed markets.

2. Method: Describes the compilation of time-series data from the SEC and the criteria used to select and cluster countries based on their capital market development.

3. Description: Presents a statistical overview of the historical trends in foreign listings in the U.S., highlighting the impact of major regulatory changes and market events.

4. Summary: Synthesizes the findings of the tested hypotheses and links them to the observed decline in benefits for firms from developed economies.

5. Conclusion: Evaluates the evidence and confirms that the hypothesis regarding deteriorating benefits for firms from developed countries is supported by the data and existing literature.

Keywords

Cross-listing, U.S. Stock Exchanges, Bonding Hypothesis, Market Segmentation, Investor Recognition, Liquidity Hypothesis, Sarbanes-Oxley Act, Delisting, Corporate Governance, Capital Markets, Investor Protection, Financial Disclosure, Developed Economies, Emerging Economies, Equity Issuance

Frequently Asked Questions

What is the core focus of this research project?

The research examines whether companies from developed countries still derive significant benefits from cross-listing their shares in the United States, or if those benefits have diminished over time.

Which specific theories or hypotheses are examined?

The study evaluates four primary hypotheses for cross-listing: the bonding hypothesis, the market segmentation hypothesis, the investor recognition hypothesis, and the liquidity hypothesis.

What is the primary research question?

The research asks if there is sufficient empirical evidence to prove that firms from developed countries, which previously benefited from U.S. cross-listing, no longer observe the same level of advantages, leading them to delist.

Which methodology was employed for this analysis?

The author compiled time-series data from the Securities and Exchange Commission, focusing on foreign listings from 33 countries over a multi-year period, while controlling for tax havens and specific market types.

What topics are discussed in the main body of the work?

The main body covers the theoretical frameworks for cross-listing, the impact of the Sarbanes-Oxley Act of 2002, the effect of SEC rule 12h-6 on deregulation, and a comparative analysis of listing trends.

What are the characterizing keywords of this thesis?

Key terms include cross-listing, bonding hypothesis, capital market development, U.S. regulatory compliance, and investor protection.

How did the 2007 SEC ruling influence the findings?

The 2007 ruling easing deregulation requirements is identified as a major turning point, marking an unprecedented period of voluntary delisting by large European firms.

Why did the researcher struggle to compare developed and emerging economies?

The data population for emerging economies that listed on U.S. exchanges was small and characterized by high variance, making it statistically difficult to draw reliable conclusions compared to the developed economies sample.