Cross-listing and the alignment between short and long-run performance

• Published in: Journal of multinational financial management Vol. 62; p. 100702
• Main Author: Ghadhab, Imen
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.12.2021
• Subjects: Cross-listing; Event study; Firm performance; Legal bonding; G30; Firm performance; G15; Legal bonding; G14; Event study; Cross-listing
• ISSN: 1042-444X; 1873-1309
• DOI: 10.1016/j.mulfin.2021.100702

•We investigate short and long-run performance for cross-listed firms.•Non-American firms cross-listed in the US exhibit higher initial price reaction.•This misalignment is more pronounced with less effective local governance standards.•The changes in the U.S regulatory environment have no diminishing effect on cross-listing economic benefits.•Important short-run price reactions are detected in crisis times. This paper examines the alignment between initial price reaction and post-cross-listing performance for non-American firms cross-listed in the U.S. Using an event study methodology, we show that, while cross-listed firms exhibit long-term performance, short-term valuation gain is more important. We also find a significant difference between short and long-term price reactions, explained by legal investor protection considerations. Additional analysis shows that the change in the U.S. regulatory environment has no diminishing effect on cross-listing economic benefits. We also show more important short-run price reactions in crisis time, leading to more significant misalignment between short and long-term performance. Our results are robust to several control firm and country characteristics.