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The Impact of Cross‐Listing on the Home Market's Information Environment and Stock Price Efficiency
Author(s) -
Dodd Olga,
Gilbert Aaron
Publication year - 2016
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12110
Subject(s) - cross listing , information asymmetry , business , listing (finance) , stock (firearms) , stock price , quality (philosophy) , stock market , financial economics , economics , finance , mechanical engineering , paleontology , corporate governance , philosophy , epistemology , series (stratigraphy) , engineering , biology , horse
We empirically examine changes in information asymmetry and informational efficiency of cross‐listed stocks in their home market around a cross‐listing in the United States. We estimate intraday market microstructure measures of information asymmetry and price efficiency, and find that a U.S. cross‐listing significantly improves the quality of a firm's information environment and stock price efficiency in the home market. This improvement is stronger for cross‐listings that take place after the adoption of Sarbanes‐Oxley Act. Our results demonstrate that stricter disclosure from a U.S. cross‐listing is beneficial, in line with the legal and reputational bonding hypotheses.