Equity Cross-Listings in the U.S. and the Price of Debt

Abstract

This study examines whether foreign firms raise debt capital more often and at lower rates after cross listing their equity shares in the U.S., and the sources of these debt market benefits. Employing a large global sample from more than 40 countries, we find that firms raise debt capital more frequently in the bond market and issue fewer syndicated loans following an equity cross-listing on a U.S. exchange. Offering yields of bonds are significantly lower after the cross-listing, while syndicated loan spreads do not change. We also find that cross-listed firms are more likely to conduct public bond offerings, at lower rates, instead of placing their bonds privately. Moreover, cross-listed firms domiciled in countries with a relatively weak regulatory and reporting environments issue bonds more frequently outside the U.S., while those located in countries that protect lenders well, issue more Yankee bonds, again at a lower cost. These results support the notion that bonding, information disclosure, and liquidity benefits from U.S. equity cross-listings extend to the debt holders of the firm.