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Cross-listing. Sun Yubei. Article 1:. Corporate governance, agency problems and international cross-listing: a defense of the bonding hypothesis —— G. Andrew Karolyi. What is cross-listing?.
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Cross-listing Sun Yubei
Article 1: Corporate governance, agency problems and international cross-listing: a defense of the bonding hypothesis —— G. Andrew Karolyi
Whatiscross-listing? Cross-listingisusuallyastrategicchoicemadebyafirmtolistitsequitysharesononeormoreexchanges, inadditiontoitsdomesticexchanges.
Market segmentation hypothesis Whentheinvestmentbarrierishigher:
Market liquidity more liquid equity markets could lead to an increase in the liquidity of the stock and a decrease in the cost of capital.
Investor recognition • Signal effect • Stringent disclosure requirements • Improved information to potential investors and customers • Media attention • Greater analyst coverage • Better analyst’s forecastreports • Higher quality accounting information
Bondinghypothesis Investor protection cross-listing in higher standard market acts as a bonding mechanism used by firms(that are incorporated in a jurisdiction with poor investor protection and enforcement systems to)commit themselves voluntarily to higher standards of corporate governance. In this way, firms attract investors who would otherwise be reluctant to invest.
Some financial media have argued that the implementation of the Sarbanes-Oxleyact in the United States has made the NYSE less attractive for cross-listings, but recent academic research finds little evidence to support this.
sox TheSarbanes–Oxley Act of 2002is a United States federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms. The bill was enacted as a reaction to a number of major corporate and accounting scandals.
sox top management must individually certify the accuracy of financial information penalties for fraudulent financial activity are much more severe increase the independence of the outside auditors who review the accuracy of corporate financial statements increase the oversight role of boards of directors
sox Opponents of the bill have claimed it has reduced America’s international competitive edge against foreign financial service providers, because it has introduced an overly complex regulatory environment into U.S. financial markets.