Report

Firm value and cross-listings: the impact of stock market prestige

Abstract: 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 cross-listing 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.

Keywords: Stock exchanges; Corporate governance; Corporate profits; Stock - Prices;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2010

Number: 474