DOES CORSS LISTING IN THE UK INCREASE A FIRM'S VALUE?
[Dissertation (University of Nottingham only)]
Cross-listing has gained increasing popularity these days, and many researchers have proposed different theories to explain its reasons and impacts, especially cross-listing in the US market. Doidge, Karolyi, and Stulz (2001) study 710 non-US firms that cross listed in the US market with a comparison group of 4078 firms and argue that cross listing premium exists, growth opportunities are valued more for cross-listed firms so as to give enough incentive for controlling shareholders to partially give up their private benefits, and that growth opportunities are valued more for cross-listed firms coming from countries with poorer protection of shareholder rights, as controlling shareholders could expropriate more private benefits in these countries.
Similar to the US, UK has always been a big attraction as an international market to foreign companies to list their shares. This dissertation aims to perform a similar study on cross-listing in a UK context by following the research approach originated by Doidge, Karolyi, and Stulz (2001). 63 firms cross-listed in the UK market are selected together with a comparison group of 150 firms (only listed in their home market). Most data is obtained from the DataStream. The research consists of 36 cross-sectional regressions for three years from 2002 to 2004 (another 36 regressions from 2002 and 2004 are done when excluding the Irish samples), two ten-year time series robustness test on market value and market value growth rate, and 9 additional cross-sectional regressions from 2002 to 2004 to check Doidge, Karolyi, and Stulz (2001) explanation of cross-listing premium.
Similar to Doidge, Karolyi, and Stulz's (2001) study, Tobin's q is adopted as the proxy for firm value, Sales Growth is used to represent a firm's growth opportunity, and another 6 variables are applied to show the country level characteristics where the firm comes from.
Generally speaking, this study shows increment of firm value by listing in the UK market and excluding the Irish firms from the sample will not materially alter the result. Though the time series tests do not give strong support of the increment in market value or market value growth rate after cross-listing, the mean of market value and market value growth rate do increase. Additionally, some evidence is found that growth opportunities are valued more for cross-listed firms, which partially backs up Doidge, Karolyi, and Stulz's (2001) cross-listing premium explanation. However, their argument that growth opportunities are worth more for firms from
countries with worse investor protection does not find robust confirmation in this research.
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