Abstract
The globalization of financial markets has seen ever-increasing numbers of firms choosing to list their stocks on foreign exchanges. We examine whether the extent of economic and financial market integration (or segmentation) between a firm's home country and listing country influences stock price reaction by examining the case of two “similar” countries: the U.S. and Canada. During the 100 days before the week of interlisting in the U.S., (risk-adjusted) stock prices of Canadian firms rise (on average) by over 9.4%, rise by an additional 2% around the interlisting date, but follow with a corresponding drop of 9.7% in the 100 days after interlisting. We interpret this evidence to be consistent with the financial market segmentation between Canada and the U.S. However, a subsample of Canadian resource firms does not exhibit these stock price effects, suggesting industry-related factors may also be an important determinant of integration. We also find average trading volume in interlisted stocks more than doubles in the months following interlisting.
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*Stephen R. Foerster (Ph.D., University of Pennsylvania-The Wharton School) is an Assistant Professor of Finance at the Western Business School. His current research interests include global security listings, the predictability of stock returns, and Canadian capital markets.
**G. Andrew Karolyi (Ph.D., University of Chicago) is an Assistant Professor of Finance at The Ohio State University. His research interests include modelling financial market volatility and international asset pricing.
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Foerster, S., Karolyi, G. International Listings of Stocks: The Case of Canada and the U.S.. J Int Bus Stud 24, 763–784 (1993). https://doi.org/10.1057/palgrave.jibs.8490254
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DOI: https://doi.org/10.1057/palgrave.jibs.8490254