Does Cross Listing in the U.S. Really Enhance the Value of Emerging Market Firms?

Abstract

In this paper, I study the valuation effects of cross listing in the U.S. for a panel of emerging market firms over the period from 1990 to 2003. In line with Kristian-Hope et al. (2007), I find that only those firms from high disclosure regimes gain from Level 2/3 listing in the U.S. The gains are not immediate, but materialize once the firm has listed in the U.S. for at least five years. I also document long-term, but not immediate valuation gains for Level 1 over-the-counter issues. In contrast to Level 2/3 issues, the gains are concentrated amongst firms from low-disclosure regimes. I find no positive valuation effects for Rule 144a private placements. The results suggest that the decision on the part of the majority of firms from low-disclosure regimes not to list as exchange traded depositary receipts is warranted.

Keywords: Cross listing, corporate valuation, emerging markets

JEL Classification: G15, G34, G35