THE IMPACT OF U.S. CROSS-LISTINGS ON ASIAN COMPANIES

Abstract

This study took a holistic approach in studying the topic of cross listing by focusing on its three aspects – characteristics of cross-listed companies on U.S. exchange, local stock price reaction of Asia Pacific companies to U.S. listing, and the behavioral difference of a cross-listed company during the period of subsequent earning announcement after the listing. I found that cross-listed companies listed on U.S. exchanges were largely big capital-intensive companies with less leverage on their balance sheets. Also, these companies exhibited lower liquidity and profitability. Second, for some of these companies that were domiciled in Asia Pacific region, their respective local stock price showed a significant increase during the period leading up to listing. However, the significant positive return was only temporary and the price corrected itself thereafter. Lastly, I found that the relationship between market capitalization and abnormal returns during earning announcement differed between Asian cross-listed and non cross-listed companies. The Asian origin appeared to have reversed the inverse relationship between market capitalization and abnormal returns, suggesting that investors of larger Asian companies tend to be more optimistic than those of their local counterparts.