Cross-country competitive effects of cross-listings

Abstract

This paper studies the cross-country competitive effects of foreign listings on U.S. exchanges. We show that incumbent U.S. firms respond strongly negatively to foreign listings and weakly positively to foreign delistings. The performance decline of U.S. firms is related to the competitive advantages that foreign firms receive from placing their shares in the United States and is observed in both the short-run and the long-run for a variety of metrics. The competition impact differs widely across various country, industry, and firm characteristics. Our findings highlight an important role of international markets in influencing the operating performance and corporate decision-making of U.S. firms. Valuation Insight: Listing of shares by foreign firms on US exchanges is found to have a negative value effect on domestic US firms, both in the short run and in the long run. This occurs because foreign firms receive various competitive benefits from placing their shares in the US. The inference is that international markets have an important impact on operating performance and firm value.