The Economic Consequences of Increased Disclosure: Evidence from International Cross-Listings

Abstract

We study return volatility and trading volume at times of earnings announcements to see if the increased disclosure faced by non-U.S. firms when listing shares in the U.S. has economically significant consequences. We find a surprising change in market behavior around earnings releases: absolute return and volume reactions to earnings announcements typically increase significantly once a company cross-lists its shares in the U.S. Furthermore, the increase in volatility and volume is greatest for firms from developed countries and firms that do not list on an organized stock exchange, rather than for emerging market firms from poor information disclosure environments or firms that submit to the stringent reporting demands of a high quality exchange listing. Additional tests support the hypothesis that it is the individual firm's disclosure environment, rather than changes in its market liquidity, ownership, or trading venue, that explain our findings.

Keywords: International cross-listing, earnings announcements, trading volume, volatility

JEL Classification: G14, G15, G32