Cross-listing can be defined as the listing of a company’s shares in a stock exchange beyond its home country boundaries. It can also be termed as a secondary listing for firms those which are already listed in their home country. Typically, when companies grow bigger and diversify business, they opt for cross-listing to raise capital from larger and more liquid foreign markets. In 2009, nearly 3100 firms cross listed their equity on major overseas stock exchanges globally (World Federation of Exchanges, 2010, list provided in appendix) . It is not only pursued by companies from developed countries but companies from emerging countries are also actively participating. Some major global cross-listing destinations are – New York Stock Exchange, NASDAQ, London Stock Exchange, Tokyo Stock Exchange, Shanghai Stock Exchange, and so on. The key focus of this paper will be on examining the stock price reaction and the patterns of returns before and after listing date for a diverse sample of firms from different countries specifically in the case of London Stock Exchange (LSE). Existing literature has enough evidence that cross-listings on US exchanges are associated with considerable positive stock market reactions (Foerster and Karolyi, 1999; Miller, 1999). However, there has been limited research on the impact of cross-listing on non US exchanges. This serves as a primary motivation for my interest to explore and gain understanding on a stock’s return in its home market as result of cross-listing on LSE. The rest of this paper is structured in the following manner. Section 2 provides a literature review, while section 3 outlines the data, sample and research methodology. Section 4 presents the empirical results and its discussions. Finally, in section 5 I draw a conclusion. In this section, I present an overview of the existing literature that has been reviewed as a part of gaining an understanding on the extent of work that has already been done on the topic of cross-listing and its impact on stock returns. Moreover, literature review was also essential for understanding the statistical methodologies and approaches that I can apply in this paper for testing my hypothesis. Cross listing has been a topic of immense interest among researchers for a long time. There has been lot of developments as well as debate in the cross-listing literature on its different aspects such as motivation for companies to cross-list, whether cross-listing creates value, its impact on risk and return, its financial and economic impacts so on and so forth.
The coins made in gold, silver and bronze were traded during Roman Empire and the shortage of coins created a barrier for money circulation. However with the establishment of paper money, a sophisticated banking, global clearing system and electronic money, the global financial system evolved with a worldwide framework of legal agreements. In the Global Financial market, foreign currencies issued by the world, countries are traded by the buyers and sellers using currency exchange rates. Now a day, it is very common practices of companies in one country to raise capital in a foreign country by listing their stocks on major foreign exchanges given the growth of equity markets are becoming more globalized (SNHU, 2015).
Social pressures contribute to their judgement of trading activities that logic cannot explain. This links in to heading behaviour which is where firms have a tendency to follow similar decisions from the market leader or as (baker and smith) first declarer of the cash dividend. In turn this can lead smaller firms to signal through the payment of dividend payout about future profitability. Signalling is seen as a good interpretation by investors of management view of which direction the company is heading.
The Efficient Market Hypothesis suggests that market prices fully reflect all information available to the public. However, practitioners and regulator are uncertain as to the validity of this hypothesis. The questions that Bloomfield raises are: If market prices truly reflect information, why do investors waste efforts by trying to identify mispriced stock prices? Why do managers try to hide bad news in footnotes? And why do regulators try to prevent them from doing this? Robert J. Bloomfield presents an alternative to EMH called the Incomplete Revelation Hypotheses. IRH suggests that statistical data which is more costly drives fewer trading interest. Therefore information that is more costly to extract from publicly available information is not fully reflected in the market prices.
The study outlined in the article is well organized in its major parts, including introduction, literature review, methodology, results, and discussions. The introduction provides the research question and purpose, while the remaining parts provide sufficient data to help in justifying the hypothesis and rationale of the study.
-Global capital markets were increasingly selective, as national and trading exchange limitations become less relevant, shareholders demand enhanced returns
One of the strongest arguments against cross-border listing of a stock would be that it can sometimes be very costly to meet the disclosure and listing requirements that are imposed by the foreign exchange and regulatory authorities of the country that it is being cross-border listed in. This can be seen here in the United States. Many foreign companies choose not to cross-list in the U.S. because of the SEC and the rules and regulations that are imposed on stocks listed on the NYSE. The second major argument against cross-listing a stock would be that once a company’s stock is made available to foreigners, the foreigners might acquire a controlling interest and challenge the domestic control of the company. In fact because of this fear, some governments in both developed and developing countries have imposed restrictions on the maximum percentage ownership of local firms by foreigners. Some examples would be India, Mexico and Thailand where foreigners are only allowed to own up to 49 percent of the outstanding shares of a local firm.
At the same time, NASDAQ, which has been divested by the NASD in 2000/2001, listed 2,934 stocks with total capitalization of $2.6 trillion. By June 2011, NYSE listing capitalization had grown to $13.791 trillion and NASDAQ listing capitalization totaled $4.968 trillion.” (TEALL, J. L.) “Traditionally, the New York Stock Exchange (NYSE) and the American Exchange (ASE or AMEX) were regarded as the two national exchanges in the U.S., but the NYSE acquired the ASE in 2008, incorporating its equity business into its own.” (TEALL, J.
Some investors are wary about the process of investing internationally, carrying the concept that it is always to precarious and complex. While there are risks involved with international investing, there are also very beneficial and profitable reasons for doing so. Ev...
The project is done to find out the impact of stock split on the stock market. In our project, we have made use of event study methodology to assess the accuracy of stock price reaction of 39 public listed Indian companies in National Stock Exchange (BSE) in the year 2006 and onwards. The abnormal returns (actual returns-returns from regression line) results were taken for 20 days before and after the announcement date to test whether the result is significant or not (Level of significance=5%). The project shows that there is no significance difference in the price level before the announcement date while after the announcement date, there was a significant difference in the price level for few days(level of significance being 5%) The project supports the hypothesis that Indian stock market is semi strong efficient.
...emakdej (2007) carried out a research of 100 splits in the Stock Exchange of Thailand and detected significantly negative impact 20 days before and 18 days after the ex-date of the stock split. This was the comparison with other studies that noted positive abnormal returns around the stock split dates. There was also an increase in both the proportion of large shareholders and the number of investors. Trading volumes were found to be lower than before. This study also found the evidence that the systematic risk was lower during the ex-dates but returned to preceding level after the stock split. Another have noted that abnormal returns were found only in the first year after the declaration of the stock. It was also noted that the significant abnormal returns only occurred during the period of 1975-1987 because of lower systematic risk in the New York Stock Exchange.
Total Shareholder Return (TSR) is a critical key performance indicator (KPI) to measure portfolio performance as well as evaluate investment decision in firms which forms the crux of the research presented in this paper. TSR is a compounded and annualised measure including dividends paid to shareholders by Temasek however, it does not include capital injections by shareholders. Temasek is a long term investor and tracks its TSR over various time periods. Following gives Temasek’s portfolio performance
In this chapter, the data collected were systemically processed, tabulated and made suitable for analysis and interpretations. It was a study on stock price movement in selected banking companies through data collected for the nine months from July to March. The performance is analyzed for the stock prices of Current market price, Yearly high, Yearly low, Last completed financial year value, Sales, Operating profit margin, Net profit, Equity, Earning per share, Book value, Factor value, Dividend and Price Earnings. The results obtained were classified, tabulated and the following analyses were performed in fulfilling the objectives of the study.
This chapter reviews the literature that describes the published articles, journals and books were collected to investigate the theories and past empirical studies which are related to this study. This chapter consists of literature review, review of relevant theoretical model, conceptual framework and overall conclusion of chapter two.
Fernandes and Ferreira (2009) argue that insider trading regulation and its enforcement improve the informativeness of stock prices, but this improvement is concentrated in developed markets.
IPO, the traditionally preferred route, is the method whereby the investors will have a right to offer their shares for sale to the public and then exit. The most evident benefits include longer-term shareholding benefits to the investor in the company and higher valuation, which is dependent on the prevailing market conditions. However, the listing of the shares of a company is subject to strict regulatory requirements and restrictions, which make the IPO a lengthy and expensive process. Despite the cumbersome process, IPO exits are seen as the primary mode of exit. Instances of IPO exits in 2013 are SAIF’s exit from JustDial and TPG’s exit from Shriram Transport Finance. Apparently, for PE investors, what made a good year for exits the great year was the strength of IPO channel in 2013. The number of IPO’s for buyouts soared 67% worldwide from 112 in 2012 to 187 in 2013.