Globalization and the value of US listing: Revisiting Canadian evidence

Abstract

As capital markets become integrated, the value of foreign listing and, consequently, the number of foreign listings should be expected to decline. The dramatic surge in foreign listings on US stock exchanges in recent years suggests that motivations and value of listing may also be changing as markets become increasingly globalized. We explore this issue by comparing both short- and long-run valuation effects of Canadian listings in the US in pre- and post-1990 periods. We document that the positive price and liquidity effects for Canadian stocks surrounding US listing have declined over time. The analysis of long-run performance, however, shows that Canadian firms list in the US after a strong market performance but underperform Canadian market indexes by 13–30% over the three years after the listing in both pre- and post-1990 periods. Further, the determinants of long-run performance appear to be significantly different from that in the short-run. Our evidence suggests that valuation effects of US listing may be driven by several factors, including liquidity and industry factors, that vary cross-sectionally and over time.