Abstract
This study investigates the effects of listing on the U.S. exchanges on trading volume for stocks listed on the two Canadian stock exchanges: the Toronto Stock Exchange (TSE) and the Vancouver Stock Exchange (VSE). The results show substantial differences between the two samples. When a TSE security is cross‐listed, both trading volume and stock turnover, the number of shares traded as a percentage of number outstanding, almost double their pre‐listing levels. In contrast, when a VSE stock is cross‐listed, there is only a slight increase in trading volume and a sharp decline in turnover. The TSE is also able to maintain its pre‐listing levels of trading volume in cross‐listed securities, whereas the VSE loses about half the trading volume in these stocks to the U.S. exchanges. Even after controlling for the firm‐specific factors, the Canadian exchange‐specific factors remain the dominant factors in explaining the cross‐sectional variation in liquidity effects. Neither the differences in trading costs nor in listing and disclosure requirements between the two exchanges explain these results.
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