Does cross listing in the USA really enhance the value of emerging market firms?
Thomas G. O'Connor
Purpose – The purpose of this paper is to study the valuation effects of cross listing in the USA for a panel of emerging market firms over the period from 1990 to 2003. Design/methodology/approach – Using firm-level data from Worldscope, the paper examines the valuation effects of listing in the USA for a panel of emerging market firms. Specifically, the following techniques are employed in order to control for self-selection bias: calculate the average effect of the treatment on the treated using propensity score matching, pooled ordinary least squares with Mundlak corrections, firm-fixed effects, and panel treatment effects models. Findings – In line with previous researches, only those firms from high-disclosure regimes gain from Level 2/3 listing in the USA. The gains are not immediate, but materialize once the firm has listed in the USA for at least five years. Also documented were long-term, but not immediate valuation gains for Level 1 over-the-counterissues. In contrast to Level 2/3 issues, the gains are concentrated amongst firms from low-disclosure regimes. No positive valuation effects were found for Rule 144a private placements. The results suggest that the decision on the part of the majority of firms from low-disclosure regimes not to list as exchange traded depositary receipts is warranted. Research limitations/implications – It may have been interesting to further examine the causes of the results. For example, it would have been interesting to see how firm visibility (media and analyst coverage), liquidity, and capital issuance changed around the time of listing. However, data availability prevented such an analysis. Originality/value – As opposed to standard event studies, this paper examines the effect of listing on firm value using valuation metrics, i.e. Tobin's q. Second, and unlike event studies, the techniques employed are substantially more robust to self-selection bias.
Disclosure, Emerging markets, Shares, Stock exchanges, United States of America, Value analysis
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