International Cross Listing Bonding Evidence | …

The previous analysis establishes that cross-listed firms onmajor U.S. exchanges have outcomes that are consistent withimproved corporate governance over non-cross-listed firms. In thisanalysis, the comparison group is all non-cross-listed firms, whichincludes firms that may never cross-list as well as cross-listedfirms in their pre-cross-listing period. However, an alternativeexplanation for our findings is that only the better governed firmschoose to cross-list on a major U.S. exchange, which in turn drivesour results. While our previous tests employed time varyingcross-listing indicator variables that equaled one onlyafter the firm cross-listed, we furtherexamine this issue by performing two additional tests in which weexamine the sensitivity of CEO turnover to performance in thepre-cross listing period. In the first, we examine how thesensitivity of CEO turnover to firm performance differs before andafter cross-listing, where we restrict the sample to firms thatalready have, or will have a cross-listing of the same type duringour sample period. Theadvantage of this experiment is that the non-cross-listedcomparison group is firms that will have a cross-listing of asimilar type during the sample period (that is, thepre-cross-listing period of the cross-listed firms). If firms thatpursue exchange traded cross-listings have better governance beforecross-listing, then we would expect to find little differencebetween cross-listed firms and ``to-be'' cross-listed firms. Forspace considerations, in this test we focus on the broad Civilversus Common Law classifications using the lagged earnings ratioperformance measure, but other governance classifications andperformance measures produce consistent results. Model 1 table 6 shows that thesensitivity of turnover to performance for exchange tradedcross-listings is significantly larger than non-cross-listed firmsthat will eventually cross-list on a major exchange in lowshareholder protection countries. Therefore, the results suggestthat the difference in governance outcomes is driven by thepost-cross-listing period of cross-listed firms. For Level 1 andRule 144a cross-listings, the interactions between cross-listingtype and firm performance are not significantly different betweencross-listed and non-cross-listed firms.

Critics have challenged the viability of the bonding hypothesis, which I answer in this review.

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Cross-listing to bond increases firm ..

STULZ: Private Benefits of Control, Ownership, and the Cross-listing Decision;

We also investigate several alternative explanations for ourresults, including the potential endogeneities that arise in astudy of cross-listing and governance due to the non-random natureof the decision to list in the United States. For example, weinvestigate if our results are due to the notion that bettergoverned firms are the ones that self-select to cross-list. To doso, we examine several specifications that measure the sensitivityof CEO turnover to performance for cross-listed firms prior to cross-listing. These tests show that therelation of turnover to performance is insignificant (significant)in the pre-cross-listed (post-cross-listed) period, which suggeststhat our results are not an artifact of the pre-cross-listedgovernance status of our sample firms. We also examine thepotential impact of control changes around cross-listing on ourresults since cross-listed firms often sell control blocks duringthe listing year. We find our results are robust when theseobservations are omitted. Further, we examine if cross-listed firmsterminate poorly performing management because they are able toaccess a more international pool of top management candidates bytracking the newly appointed CEOs' previous work experience. Wefind that the vast majority continue to come from the domesticlabor market, which suggests our results are not driven by labormarket shifts.


A Defense of the Bonding Hypothesis" Emerging ..

Does cross-listing in the U.S. improve the corporate governanceof foreign firms? The ``Bonding Hypothesis'' proposed by Coffee(1999, 2002) and Stulz (1999) predicts that after listing on amajor U.S. stock exchange, foreign firms become subject tostringent U.S. investor protections which constrain insiders fromexpropriating minority shareholders. Because it has importantimplications for the effectiveness of U.S. laws and enforcement aswell as the efficacy of market-based approaches in improving globalcorporate governance, the bonding hypothesis has attracted therecent attention of academics and practitioners alike.

This article questions the bonding role of cross-listing

Submitted in partial fulfillment of the degree Master of Arts in Law and Diplomacy at the Fletcher School of Law and Diplomacy. Abstract: As foreign firms all over the world are increasingly cross-listing on U.S. stock exchanges, there is a vigorous discussion going on among academics as to why foreign firms cross-list on a U.S. stock exchange. One of the most discussed reasons is the 'bonding hy