Why do Firms Cross-(de)list? An Examination of the Determinants and Effects of Cross-delisting

Abstract

This paper examines cross-listed stocks that delist in the US. Consistent with the liquidity hypothesis and Merton's awareness hypothesis, we find that firms with a lower percentage of turnover in the US are more likely to voluntarily delist. Contrary to the predictions of the bonding hypothesis, firms are more likely to voluntarily cross-delist if they are from countries with weaker investor protection. We find an average negative return of approximately 5% around the delisting announcement. This negative return is mitigated if the stock has a low proportion of turnover in the US, which also supports the liquidity and bonding hypotheses.