The Effects of International Cross-Listing on Rival Firms

39 Pages Posted: 1 Dec 2003

See all articles by Michael Melvin

Michael Melvin

CESifo (Center for Economic Studies and Ifo Institute); University of California, San Diego (UCSD) - Rady School of Management

Magali Valero-Tonone

affiliation not provided to SSRN

Date Written: February 2003

Abstract

The analysis focuses on the stock price impact of firms' U.S. cross-listing on home-market rival firms. A theoretical model is presented that indicates the effect is ambiguous, and that it depends on whether there is a decrease in the cost of capital for rival firms and on the improved growth opportunities of the listing firm that make rivals have relatively lower growth prospects. The empirical work uses both listing dates and announcement dates of forthcoming ADR programs. An event study approach is employed to analyze the impact on the home market price of the rival firm around the dates of listing and announcement of listing. We find negative cumulative average abnormal returns for the rival firms around the announcement and listing dates, consistent with rival firms being hurt by the listing. The evidence suggests that investors see rivals as less transparent, less informative, and with poorer growth prospects relative to the listing firm. We also find evidence that the effect on the rival firm is stronger for firms from emerging market countries than for firms from developed market countries.

Suggested Citation

Melvin, Michael and Melvin, Michael and Valero-Tonone, Magali, The Effects of International Cross-Listing on Rival Firms (February 2003). Available at SSRN: https://ssrn.com/abstract=472723 or http://dx.doi.org/10.2139/ssrn.472723

Michael Melvin (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Magali Valero-Tonone

affiliation not provided to SSRN

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
406
Abstract Views
2,669
Rank
132,982
PlumX Metrics