How Do Cross-Listing Benefits Change for Foreign Firms that Leave the U.S.?

• In Event: Forum on Corporate Reporting

Abstract

This paper examines factors that influence foreign firms’ voluntary deregistration from the U.S.: deviation from the initial net benefits, similarity to cross-listed and non-cross-listed peers, and changes in peer characteristics. First, we find that firms tend to deregister if their net benefits deteriorate relative to their initial value when they entered the U.S. Second, we show that capital raising ability of deregistered firms were more similar to those of cross-listed peers around the U.S. entrance but become more similar to those of non-cross-listed peers around deregistration. Third, we find that firms tend to deregister if their home peers’ economic characteristics worsen but accounting quality improves. Also, firms tend to deregister if cross-listed peers’ U.S. liquidity and accounting quality worsen but other economic characteristics (i.e., ROA and analyst following) improve. We additionally show that the development of domestic capital markets and penetration of foreign banks are associated with the improved accounting quality of domestic firms. Overall, the results imply that cross-listing costs and benefits are determined by not only firm performances but also the changing market conditions and regulations in the U.S. and home country.

Authors

• Elizabeth Gordon, Temple University

• Caroline Lee, Temple University