Yui LAWFollow

Date of Award


Degree Type


Degree Name

Master of Philosophy (MPHIL)



First Advisor

Prof. Yue MA

Second Advisor

Dr. Yifan ZHANG


Cross-listing refers to firms listing their equities on more than one stock exchange. Cross-listing is an interesting topic of international finance. This is because along with the deeper integration of the global financial market, we should see lesser importance of geographic factors. Thus, the motivations and effects of listing a firm on exchanges of different regions should have essential economic implications. The reputation bonding hypothesis suggests that U.S. cross-listing improves the information environment of a firm because of the higher disclosure standard and more analyst coverage. The legal bonding hypothesis argues that U.S. cross-listing improves the investor protection and corporate governance of a firm since the firm is under more stringent law and regulation. The firm growth hypothesis points out that U.S. cross-listing lowers the external capital cost of a firm and thus enables the firm to achieve a higher growth rate.

Using a sample with 12532 firms of 23 developed regions from 2006 to 2011, this thesis tests the three hypotheses of cross-listing. Firstly, my empirical results show that a cross-listing on the U.S. exchanges improves the equity returns predictability of institutional investors. I find a stronger positive correlation between the changes in institution ownership level and future equity returns of U.S. cross-listed firms. This suggests that the information environment is improved after a U.S. cross-listing. However, the improvement in information environment exists only in non-crisis period. Secondly, the results support the firm growth hypothesis. The U.S. cross-listing event only has a positive effect on equity returns of firms with younger age and lower dividend yield. This effect becomes less obvious during the crisis period. Thirdly, the legal bonding effect of U.S. cross-listing only exists during the crisis period, when the financial market is volatile. During the crisis period, a U.S. cross-listing increases the equity returns of the firms form non-common-law regions, but not the firms from common-law regions.

Recommended Citation

Law, Y. (2012). U.S. cross-listing, institutional investors, and equity returns (Master's thesis, Lingnan University, Hong Kong). Retrieved from