Firm Value and Cross-Listings: The Impact of Stock Market Prestige - Federal Reserve Bank of New York

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Firm Value and Cross-Listings: The Impact of Stock Market Prestige

September 2010 Number 474

JEL classification: G15, G20

Authors: Nicola Cetorelli and Stavros Peristiani

This study investigates the valuation impact of a firm’s decision to cross-list on a more (or less) prestigious stock exchange relative to its own domestic market. We use network analysis to derive broad market-based measures of prestige for forty-five country or regional stock exchange destinations between 1990 and 2006. We find that firms cross-listing in a more prestigious market enjoy significant valuation gains over the five-year period following the listing. We also document a reverse effect for firms cross-listing in less prestigious markets: These firms experience a significant decline in valuation over the five years following the listing. The reputation of the cross-border listing destinations is therefore a useful signal of a firm’s value going forward. Our findings are consistent with the view that cross-listing in a prestigious market enhances a firm’s visibility, strengthens corporate governance, and lowers informational frictions and capital costs.

Available only in PDF pdf

47 pages / 292 kb

For a published version of this report, see Nicola Cetorelli and Stavros Peristiani, "Firm Value and Cross-Listings: The Impact of Stock Market Prestige," Journal of Risk and Financial Management 8, no. 1 (2015): 150-80.

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