DP4987 Where is the Market? Evidence from Cross-Listings

Author(s): Michael Halling, Marco Pagano, Otto Randl, Josef Zechner
Publication Date: April 2005
Keyword(s): cross-listing, flow-back, trading volume
JEL(s): G15, G30
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4987

We investigate the distribution of trading volume across different venues after a company lists abroad. In most cases, after an initial blip, foreign trading declines rapidly to extremely low levels. However, there is considerable cross-sectional variation in the persistence and magnitude of foreign trading. The ratio between foreign and domestic trading volume is higher for smaller, more export and high-tech oriented companies. It is also higher for companies that cross-list on markets with lower trading costs and better insider trading protection. Foreign trading is high close to the cross-listing date but decreases dramatically in the subsequent six months. This accords with the ?flow-back hypothesis? that declining foreign trading is associated with the gravitational pull of the home market.