Insider-owned firms pursue U.S. cross-listings following periods of extraordinary performance. However, the long-run post-cross-listing abnormal returns become negative only for insider-controlled cross-listings. We find that the Sarbanes-Oxley Act (SOX) has mitigated the market-timing attempts as negative abnormal returns are limited to the pre-SOX period, supporting a cross-listing bonding benefit after U.S. securities regulation was enhanced. In addition, investors anticipate future operating performance as stock returns incorporate forthcoming operating outcomes one and two years ahead. Whereas capital-raising cross-listings show better operating performance than non-capital-raising, the returns of capital-raising firms are more sensitive to the potential agency problems created by insider-ownership.

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Journal of Multinational Financial Management
Sprott School of Business

Esqueda, O.A. (Omar A.), & Jackson, D. (2015). Cross-listing performance and insider ownership: The experience of U.S. investors. Journal of Multinational Financial Management, 32-33, 77–94. doi:10.1016/j.mulfin.2015.10.001