Does International Cross-Listing Improve the Information Environment?

Author(s):  
Nuno G. Fernandes ◽  
Miguel A. Ferreira
2019 ◽  
Vol 45 (5) ◽  
pp. 671-685
Author(s):  
Madhurima Bhattacharyay ◽  
Feng Jiao

Purpose The purpose of this paper is to identify and examine two contrasting mechanisms of information asymmetry for cross-listed firms with respect to the information environment and its impact on earnings response. Design/methodology/approach The study empirically assesses two mechanisms of information asymmetry (“seeing” and/or “believing”) by looking at abnormal returns and volume reactions to international firms’ earnings announcements pre- and post-listing in the USA from 1990 to 2012. Findings The authors’ findings indicate that investors “seeing” more (media and analyst coverage) decrease the earnings response; however, “believing” more or gaining more credibility has the opposite effects. Based on the results, both mechanisms of information asymmetry can take effect simultaneously. Research limitations/implications The study sheds light on the multi-dimensional impact of the improved information environment that non-US firms face when they list their securities on US exchanges. Originality/value This study identifies and reconciles these two mechanisms of information asymmetry (visibility and credibility) under one setting and estimates the magnitude of each effect empirically.


Author(s):  
Martin Kim ◽  
Steve Lin ◽  
Liu L Yang

This study examines whether improved information environment in the OTCQX International market (hereafter QX market) benefits blue-chip foreign private issuers (FPIs). We find that around 600 FPIs traded their stocks in the QX market during 2007-2016, and they are financially better than their home-country counterparts. We also find approximately 6% abnormal return around the cross-listing days. Moreover, FPIs with higher financial reporting transparency (i.e., lower earnings smoothness and preparing financial statements in accordance with International Financial Reporting Standards) experience more pronounced abnormal returns and liquidity improvement around the cross-listing days. Further analysis shows that market premium of cross listing on the QX market is not attributed to the bonding effect. Our results highlight the importance of information environment of a less regulated OTC market in benefiting large and established FPIs, which should be of interest to market regulators, investors, and foreign firms that intend to access less regulated U.S. markets.


Sign in / Sign up

Export Citation Format

Share Document