International Finance Discussion Papers (IFDP)
August 2004
Look at Me Now: The Role of Cross-Listing in Attracting U.S. Investors
John Ammer, Sara B. Holland, David C. Smith, and Francis E. Warnock
Abstract:
We use a comprehensive 1997 survey to examine U.S. investors' preferences for foreign equities. We document a variety of firm characteristics that can influence U.S. investment, but the most important determinant is whether the stock is cross-listed on a U.S. exchange. Our selection bias-corrected estimates imply that firms that cross-list can increase their U.S. holdings by 8 to 11 percent of their market capitalization, roughly doubling the amount held without cross-listing. All else equal, we find that firms experience smaller increases in U.S. shareholdings upon cross-listing if they are Canadian, from English-speaking countries, are members of the MSCI World index, or had higher quality accounting standards prior to cross-listing. We argue that these findings suggest that improvements in information production explain U.S. investors' attraction to foreign stocks that cross-list in the United States.
Full paper (screen reader version)Keywords: Cross-listing, ADR, home bias, selection bias
PDF: Full Paper
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