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Journal of Economics and Finance

Erschienen in:

01.04.2013

Cross-listing in the home market after going public in the U.S.

verfasst von: Yaseen S. Alhaj-Yaseen

Erschienen in: Journal of Economics and Finance | Ausgabe 2/2013

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Abstract

This study analyzes the impact of cross-listing on the abnormal returns of a unique sample of 34 Israeli stocks that went public in the U.S. and then cross-listed in their home market, Tel Aviv Stock Exchange (TASE). The behavior of abnormal returns around cross-listing date implies that cross-listing in TASE is an effective mechanism in reducing market segmentation between the U.S. and the Israeli capital markets. Risk assessment following cross-listing suggests a decline in the risk exposure, which further supports a higher degree of integration between the two markets due to cross-listing.

Vorheriger Artikel Daily momentum profits with firm characteristics and investors’ optimism in the Taiwan market

Nächster Artikel Volatility, trade size, and order imbalance in China and Japan exchange traded funds

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Valero (2009) is the first to investigate this trend.

Investment barriers include the cost of transaction and accessing information of international securities and government restrictions on foreign exchange and international capital flow (Foerster 1993).

Karolyi (2006) is surveys study that summaries the most recent research in the field of international cross-listing. The survey shows that the majority of the literature have found cross-listing to be associated with positive pre-listing and negative post-listing abnormal retunes. Another study by Karolyi (1998) comprehensively summarizes several studies with focus on the market segmentation theory and the cross-listing effect on the stock prices.

Studies in this field include, but not limited to Alexander (1987), Alexander (1988), Lee (1991), Foerster (1993), Jayaraman (1993), Kadlec (1994), Lau (1994), Bekaert (1995a, b), Dharan (1995), Khan (1995), Ko (1997), Foerster (1998), Miller (1999), Blass and Yafeh (2001), Chan (2003), Doidge (2004),(2009).

Unseasoned stock is a stock that has not been previously traded in the open markets.

For robustness purposes, the abnormal returns are calculated for other pre-listing, listing, and post-listing windows. Results from other windows are referred to and discussed in the empirical evidence section.

The Patell (1976) test and the corrected version of Patell test suggested by Mikkelson (1988) are both explained in details in appendix A of Eventus user’s guide, version 8 by Arnold R. Cowan, 2007.

Following Howe (1990) and Foerster (1993), standard deviation is used here as a measurement of the risk exposure before versus after cross-listing.

A recent study by Lewellen (2010) suggest that OLS R-squared of Asset-pricing models has an extremely wide confidence interval, indicating that it provides a weak or uninformative support for the models. However, I will refer to the R-square results obtained in this research without drawing any conclusion entirely based on them.

The CAARs of small and large firms are calculated for the post-listing windows (+21, +100), (+21, +150), (+21, +200), and (+21, +250), and they all show almost an identical pattern to that observed in the post-listing window (+21, +50) represented in Table 4.

Evaluating changes in Israeli betas for each firm individually yields ambiguous results. Some of the firms experience an increase, and others experience a decrease but with different magnitudes.

Another matter could be considered under the trading noise hypothesis is the inclusion of firms cross-listed during the U.S. stock market crash of 2002. To investigate this, I sorted my full sample by the year of listing to check for changes in the risk measurements from 1 year to another. The results do not provide any additional information to explain the negative change of the Israeli beta.

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Titel: Cross-listing in the home market after going public in the U.S.
verfasst von: Yaseen S. Alhaj-Yaseen
Publikationsdatum: 01.04.2013
Verlag: Springer US
Erschienen in: Journal of Economics and Finance / Ausgabe 2/2013
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI: https://doi.org/10.1007/s12197-011-9183-x

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