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 for firms that pursue over-the-counter listings or private placements that do not require stringent reporting associated with a listing on an organized stock exchange. In spite of these puzzling findings, additional tests support the hypothesis that it is the changes in 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