Premium
Impact of International Cross‐listing on Local Exchanges: Evidence from Chile
Author(s) -
Jayakumar Vivekanand
Publication year - 2002
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/j.1369-412x.2002.00038.x
Subject(s) - market liquidity , cross listing , stock exchange , business , stock market , monetary economics , stock (firearms) , volatility (finance) , market maker , international economics , economics , financial economics , finance , corporate governance , mechanical engineering , paleontology , horse , biology , engineering
This article examines the impact of international cross‐listings on local stock exchanges by focusing on the experience of Chile. First, we analyse the consequences to the domestically traded shares of a sample of Chilean companies that undertook ADR listings. Our findings show that there is no indication of order‐flow migration from the domestic market following cross‐listings. There is, however, evidence that in the aftermath of cross‐listings trading becomes concentrated in the ADR market. There is also some indication of an increase in the base‐level price volatility of the underlying stock series following cross‐listings. Second, we study the changes in Chile's local stock market vis‐à‐vis the ADR market. We observe that the increase in the size and liquidity of the domestic stock exchange is overshadowed by the rapid growth of the ADR market. From a policy perspective, the continued rise in the number of companies undertaking international cross‐listings can cause the local stock markets to become secondary role players relative to the major foreign exchanges, thus affecting domestic financial development.