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International Cross‐Listing and Order Flow Migration: Evidence from an Emerging Market
Author(s) -
Domowitz Ian,
Glen Jack,
Madhavan Ananth
Publication year - 1998
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00081
Subject(s) - equity (law) , cross listing , shareholder , business , order (exchange) , equity capital markets , stock market , listing (finance) , monetary economics , financial economics , economics , finance , private equity , corporate governance , paleontology , horse , biology , political science , law
Policymakers in emerging markets are increasingly concerned about the consequences for the domestic equity market when companies list stock abroad. We show that the effects of cross‐listing depend on the quality of intermarket information linkages. We investigate these issues with unique data from the Mexican equity market. The impact of cross‐listing is complex—balancing the costs of order flow migration against the benefits of increased intermarket competition. These effects are exacerbated by equity investment barriers that induce segmentation of the domestic equity market. Consequently, the benefits and costs of cross‐listing are not evenly spread over all classes of shareholders.