The Long-Term Effects of Cross-Listing, Investor Recognition, and Ownership Structure on Valuation

We show that investor recognition and bonding associated with cross-listing on a U.S. exchange are distinct effects using a sample of Canadian firms . In contrast to the post-listing decline documented in the literature, we find that cross-listed firms with a single class of shares enjoy a permanent increase in valuation if they attract and maintain investor recognition over time. Valuations of firms that fail to widen their U.S. shareholder base return to pre-listing levels within two years. Cross-listed firms with dual-class shares exhibit a permanent increase in valuation regardless of the level of U.S. investor holdings. This increase in valuation for dual-class firms with few or no U.S. investors suggests the reduction in information asymmetry between controlling and minority investors has a separate impact on valuation, consistent with firm-level bonding proposed by Doidge, Karolyi and Stulz (2004). JEL classification: G12; G15