Companies Cross Listing Stock
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The internationalization of capital markets suggests that the world is moving toward an integrated, global capital market (and away from segmented domestic markets). Currently, multinational firms often list their stocks on foreign stock exchanges, an activity referred to as cross listing. For example, Sony cross-lists its Japanese stock on the New York Stock Exchange. In many circumstances, the process of cross listing can be expensive. What motivates companies to cross-list their stocks? What are the perceived benefits of cross listing, and why do these benefits exist? Answer as fully and as carefully as you can.
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This solution explains the motivations behind cross listing stocks.
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Using a cross section of effectively the entire universe of overseas listings across world markets, market preferences of firms listing their stock abroad was examined. Studies found that geographic, economic, cultural, and industrial proximity play the dominant role in the choice of overseas listing venue. Contrary to the notion that firms maximize international portfolio diversification gains in listing abroad, cross-listing activity is more common across markets for which diversification gains are relatively low. Our findings imply that the same proximity constraints that are believed to lead to "home bias" in investment portfolio decisions also exert a profound influence on financing decisions.
Cross-listing by foreign issuers onto U.S. exchanges ...
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