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RFS Advance Access originally published online on December 17, 2007
Review of Financial Studies 2008 21(2):725-761; doi:10.1093/rfs/hhm066
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© The Author 2007. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org.

Where Is the Market? Evidence from Cross-Listings in the United States

Michael Halling
University of Utah

Marco Pagano
University of Naples Federico II, CSEF and CEPR

Otto Randl
Anaxo Financial Services and University of Vienna

Josef Zechner
University of Vienna and CEPR

Address correspondence to Josef Zechner, Department of Finance, University of Vienna, Bruennerstrasse 72, A-1210 Vienna, Austria, e-mail: josef.zechner{at}univie.ac.at.

JEL Classification: G15, G30


  Abstract

We analyze the location of stock trading for firms with a US cross-listing. The fraction of trading that occurs in the United States tends to be larger for companies from countries that are geographically close to the United States and feature low financial development and poor insider trading protection. For companies based in developed countries, trading volume in the United States is larger if the company is small, volatile, and technology-oriented, while this does not apply to emerging country firms. The domestic turnover rate increases in the cross-listing year and remains higher for firms based in developed markets, but not for emerging market firms. Domestic trading volume actually declines for companies from countries with poor enforcement of insider trading regulation.

We thank Gilles Chemla, Hans Degryse, Paul Irvine, Andrew Karolyi, Philip Lane, Michael Lemmon, Mario Padula, Lubos Pastor, Sergei Sarkissian, Martin Weber, and Dariusz Wojcik for valuable comments. We thank the participants of seminars at HEC Paris, the Universities of Amsterdam, Lisbon, Porto, and Zurich, the CCEFM workshop in Vienna, the ECB-CFS Symposium on Capital Market Integration in Frankfurt, the FIRS conference in Capri, the EFA meeting in Maastricht, the ESF Workshop on Economic Geography and European Finance in Oxford, the WFA meeting in Portland, the NHH Skinance Conference (2006), and the joint seminar of Economics and Management at the University of Vienna (2006). We are grateful to Financial Thomson and especially to Jennifer Rawlinson-Grillitsch for their support. We acknowledge financial support from the Jubiläumsfonds of the Österreichische Nationalbank (Austrian Central Bank) under grant no. 8939 and from Fondazione IRI.


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