The effects of cross-listing of non-U.S. firms on the New York Stock Exchange

Abstract

The level of integration or segmentation of markets is the subject of many debates in finance. This dissertation uses cross-listing of non-U.S. firms on the New York Stock Exchange (NYSE) to achieve a better understanding of the functioning of international capital markets.

Cross-listings are examined to try to answer three main questions: 1. Are there changes in the risk/return characteristics of cross-listing firms? 2. Are there abnormal retums around the time when cross-listing of firms is announced or occurs? 3. Are there differences between the effects of cross-listing that may be due to the differences in accounting policy in the U.S. and in the countries of origin?

Strong evidence is found that there are significant effects of cross-listing of non-U.S. firms on the NYSE. The effects are especially significant when looking at changes in the risk/retum characteristics of stocks, and are quite significant for the finding of abnormal retums around the cross-listing events. The results for tests of significant differences in abnormal retums due to varying accounting policies in countries of origin are not clear cut. There is some evidence of firms from certain areas having greater abnormal retums than firms in samples that do not have to provide additional U.S. Generally Accepted Accounting Policies (GAAP) reconciliations. However, the results do not seem to lend much support to the argument that all GAAP standards other than the U.S. and Canadian are inferior and provide less valuable information to investors.

This dissertation contains empirical tests of some arguments commonly found in theoretical and empirical literature about the effects of cross-listing. The perceived value of U.S. GAAP reconciliations of non-U.S. firms is also tested. These tests are carried out using basic event study methodologies.