U.S. Cross-Listings and the Private Benefits of Control: Evidence from Dual Class Shares

University of Toronto Working Paper

45 Pages Posted: 3 Mar 2003

See all articles by Craig Doidge

Craig Doidge

University of Toronto - Rotman School of Management

Abstract

Non-U.S. firms that cross-list on U.S. exchanges have voting premiums that are on average 43% lower than other non-U.S. firms that do not cross-list. Using a panel data set comprised of 745 firms that have dual class shares, this paper shows that the difference in voting premiums is statistically significant after controlling for firm and country level characteristics and that this result is robust to alternative benchmarks and methodologies. Further, it finds that the difference in voting premiums is larger for firms from countries that provide poor protection to minority investors. An event study shows that, on average, both the high and low voting share classes benefit when firms announce they will cross-list in the U.S. However, the low voting class benefits by a larger amount, which leads to the decrease in the voting premium. Overall, the evidence supports the bonding hypothesis: cross-listing in the U.S. improves the protection afforded to minority investors and decreases the private benefits of control.

JEL Classification: F39, G34

Suggested Citation

Doidge, Craig, U.S. Cross-Listings and the Private Benefits of Control: Evidence from Dual Class Shares. University of Toronto Working Paper, Available at SSRN: https://ssrn.com/abstract=373740 or http://dx.doi.org/10.2139/ssrn.373740

Craig Doidge (Contact Author)

University of Toronto - Rotman School of Management ( email )

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416-946-8598 (Phone)

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Doidge

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